Harvia Aktie

Hello, everyone, and welcome to Harvia's Second Quarter '26 Earnings Webcast. My name is Matias Jarnefelt. I'm the CEO of the company. And with me, I have Ari Vesterinen, our Chief Financial Officer.

Hello. Welcome.

Today, we'll start by our presentation as usual, and I will be covering the highlights of the second quarter business events and key financial numbers. I will also briefly touch our strategy implementation. After me, Ari will be then going through -- the financial performance through in more detail. During the time we present, you are welcome to send your questions via the chat, and we will be more than happy to answer your questions after the presentation.

So let's get started. Quarter 2 highlights, starting with the top line. We're very happy to report that we delivered double-digit revenue growth, which mainly was driven by very strong performance in North America. Our revenue increased by nearly 12% to EUR 52.8 million, and all of this growth was organic. North America really was the highlight out of our regions, driving nearly 40% revenue increase during the quarter. This also boosted then the Sauna and Scandinavian hot tub product category as that represents a large share of our business in the North American continent.

This is also a very special quarter for us because we went through a significant IT and process upgrade program during the quarter. And the background to this is that Harvia over the past years has grown significantly, and we strongly believe that in the coming years, there is plenty of growth opportunities for Harvia to seize. And we want to prepare the company for significant scaling and scaling that we can do in a very productive way. That includes, for example, increasing the level of automatization in our operational key processes. And because of this, we have now modernized our IT systems.

Last year, we implemented this in our Lewisburg U.S. sauna cabin factory. And this year, during the quarter 2, we implemented that in our main heater factory in our headquarters in Muurame, Finland. While this will be supporting our strategy implementation and growth ambitions going forward, it had a temporary short-term negative impact on both top line and bottom line. And we estimate that approximately EUR 4 million worth of deliveries that would have otherwise happened already during this quarter were postponed to a later phase. We expect that majority of this EUR 4 million will be then realized in our quarter 3 numbers.

Now, because of this Muurame IT and process transitions, it had a significant impact on regions that are heavily dependent on technical products as part of the portfolio they sell, mainly the heating products. And this touches special regions like Northern Europe, which is very much a heater region for us, also strong in Continental Europe and APAC and Middle East areas. And this is visible in the numbers that you have seen.

APAC and Middle East and Africa was also affected by the continued war and uncertainty in Persian Gulf region. However, the region -- Gulf region represents a rather small share of our total revenue. Last year, it was around 2% of the total revenue, representing roughly EUR 4 million. And out of this, our current estimate that up to half is at risk, which potentially could be 1% impact on our growth during this year.

Profitability was impacted by postponed deliveries. Adjusted operating profit was EUR 8.6 million, and that represents 16.2% of revenue, which compared to our usual levels is, of course, on a low level. Main impact to profitability came really from the postponed deliveries as we are in high gross margin product business. There was also some one-off costs related to the upgrades, such as additional IT support needed, some overtime, et cetera, but majority of the impact indeed came from the postponed sales.

There was some impact also for the gross margin from the product and channel mix mainly because so much of the growth came from our sauna cabin business in North America. And typically, the sauna cabins have a slightly lower gross margin compared to our technical equipment side of the product portfolio. But overall, we feel that the gross margin we delivered was on a good, healthy level, and we also managed to have a rather smooth transition and cost management in the company during the time of the Muurame go-live project.

We always estimate our progress with two lenses. One is the financial results that we deliver continuously. The other is what is the progress we make on our strategic initiatives to make the company stronger for the future, lay stronger foundations for long-term growth and profitability. And this was a very busy and a good quarter in that sense.

The Muurame project process and IT upgrade was a very significant undertaking for us, involving a lot of Harvia people, and I'm very thankful for the hard work and commitment of Harvia team delivering the transition as planned. And we understand that when you have a significant IT upgrade, that always comes with some risk. And I'm very happy to report that we returned very close to normal operational capability by the end of quarter 2, and we expect that we are in full operational capacity during this ongoing quarter 3.

Also, we've been continuing our investments to drive growth, especially in facilities like expanding our Lewisburg factory in North -- in West Virginia, to support our Northern American continued growth. We've also invested in machinery in other factories, now investing in IT infrastructure that supports scaling of the business, and we've continued our investments in R&D and product innovation.

And we feel that Harvia is very well positioned to shape and lead the global sauna market as it continues to grow. And we do it through multiple means such as product innovation, commercial excellence, operational excellence and also by becoming what we think is possible, the ambassador of the whole category. And as part of that, we are pursuing activities to increase the awareness of the health benefits of sauna.

And there are some examples that are tangible already now in quarter 2, such as we've collaborated with the University of Jyvaskyla here in Finland and High-Performance Athlete Research Academy to advance the science of sauna. Also another example of our increasing digital and design leadership is that Harvia Fenix, our kind of a mid-range touch panel that we introduced around a year ago, earlier won iF Design Award and during the second quarter won a very prestigious Red Dot Design Award. So very well done to the teams behind these initiatives.

Then, summarizing the key figures. Revenue at EUR 52.8 million, and that's 11.7% growth year-on-year. And at comparable exchange rates, the growth was close to 13%. And all of this growth was organic. Adjusted operating profit at EUR 8.6 million, and that represents 16.2% of our revenue.

Operating free cash flow was at EUR 3.1 million, and this was impacted by a number of things. One is we have made quite significant investments during the quarter in expanding the production capacity, especially in North America, also costs related to the HOT, basically Harvia Operational Transformation program, which is the nick name we have for our IT and process upgrades.

Also, we have taken in material to our Muurame factory and to our Lewisburg factory so that we are well prepared to catch up the delayed deliveries and start building the finished goods inventory as we head towards the high selling season of the winter.

First half, key figures here. So revenue at around EUR 111 million, and that's roughly 12% growth. And at comparable exchange rates, that's nearly 16%, mainly because during the first quarter, there was such a significant impact on the currency conversion from USD to euros compared to situation year before. Adjusted operating profit at EUR 21 million, and that's 19.3% of revenue and operating free cash flow at EUR 15.1 million, and that's nearly 60% cash conversion.

Then when we look at the revenue distribution geographically, the picture is obviously quite striking. So all of the growth coming from one single region, North America, growing at nearly 40% and actually above 40% in local currencies and all of that organic. And then we see the impact of the heating production stop during the kind of the transition to the new systems in Muurame in that we were kind of under-delivering the heater products during this quarter to Northern Europe, Continental Europe and APAC. Much of that, as I said, we expect to be then recouped during the quarter 3.

APAC and Middle East was also impacted by the geopolitical situation in the region, as I mentioned when I opened the presentation. Northern Europe, a slight decline, standing now at 21% of our total revenue. But when you assess this, you really should have in your mind that Northern Europe is very much heaters-only region for us. So Muurame production stop and ramp-up had a significant impact on the reported revenues now during the quarter 2.

In Continental Europe, the story is the same. And what I'm happy to say is that when we look at the interest to our category in Europe, not just Continental Europe, but also Northern Europe, we see actually interest continued on a very positive path. So our expectations for the future of Europe is that it does provide us good growth opportunities in the years to come.

North America, obviously, the shining star of the quarter, growing 39% in euros and approximately 43%, 42% in USD. And that already being the biggest of our reported region, obviously it had a very positive impact to the group reported revenue. During this quarter, North America represented already 44% of our revenue. And if you actually combine then the non-European regions, so include APAC in quarter 2, we had 55%. So majority of our revenue coming from outside Europe.

The main driver for growth in North America was very strong performance of our sauna cabin business, which came from both the key account channel that we have, but also very strong growth in our own direct-to-consumer webstore. So I'm very happy to report that across our sauna cabin channels, we saw very, very positive steps forward.

Here, APAC and Middle East, a decline of nearly 5%, representing now 11% of our revenue. But here, there's a couple of remarks. The region grew by over 50% a year ago in the comparison period. Also, this region is prone to project deliveries, especially in the Gulf region. And if we think about Harvia's business portfolio, actually the only place where we have meaningful project business is in Middle East. And this business is impacted by the current situation. There have been kind of issues with actually getting deliveries to the sites and also quite a few of the projects that were supposed to be completed during the second half of this year have been postponed. So as I said, we would expect that potentially for the whole group level, the Gulf situation could have around 1% impact on our reported revenue.

But I'm also very happy to say that when I look outside the Gulf region, I see continued positive momentum. And for us, there's significant countries in the region that we have been developing systematically, like China, Japan, Australia, and those all continue to perform in a good way.

So then, looking at the product portfolio that we sell. Heating equipment share declined below 50%, impacted by the Muurame factory transition. Saunas and Scandinavian hot tubs increased to 30%, fueled by significant growth of sauna cabin business in North America.

Steam products came down a couple of percentage points, impacted by two things. One is that steam business, we mainly have in two regions, it's Middle East and North America, and we had issues in both. Middle East projects were impacted by the Gulf war. And in the Northern America, we see that the steam category has been growing significantly more slowly than the traditional sauna category or infrared sauna category, which get a lot of boost from social media. And the other thing is that there are also some internal improvement opportunities that we are working through. And our expectation is that those will have impact during the second half of this year.

So here, again, the picture. Saunas, the shining star growing by 44%, all of the others growing, but in particular heating equipment impacted by Muurame, and steam products, unsatisfactory performance for the reasons I mentioned.

Harvia is strategically very interestingly positioned. We are the global leader of a market that is growing from a niche to volume health and wellness market. And in this transition, our strategic ambition is clear. We want to continue to lead and shape this global sauna market as it continues to evolve and grow, and want to provide everyone reasons to experience sauna and join the global sauna family.

And we drive towards this ambition through implementing four strategic focus areas, answering questions, what, where, to whom and how, what is really related to product and portfolio leadership and being more of a solution business than just a individual component provider. Where refers to us winning the countries that matter the most for the future of sauna business. To whom, it's marketing and sales excellence and channel management excellence so that we have the strongest position in the channels that matter. And also how is very important, very much related to ability to grow, to build capacity, to do it in a productive way and driving new competencies as the sauna business continues to move from product business to increasingly a wellness and lifestyle business.

And I'm happy that during second quarter, we did take significant steps forward in terms of product competitiveness, which is visible in our performance in the sauna cabin business in North America. I think we have a very competitive range there now, ranging from the entry-level price point to also higher price points, continued strong demand for our heating equipment, which is our core. And one of the evidence is that we've been recently getting actually quite many design awards for our products. And Harvia Fenix is one of the highlights, and it continues to sell very, very well. So really hitting a sweet spot in the market with design functionality and price point.

In winning the strategically important market, it really is about winning the key countries that matter. And I'm very happy to say that while there is now obviously quite striking difference between growth of North America and declines in all the other regions, it's basically due to the production transition that we've talked about and the demand signals we have in the large countries across the world where we focus, continues to be very positive.

Leading in key channels, so channel expansion and being more competitive, sharper, more interesting, inspiring across our channel landscape continues to bear fruit and Northern American performance reflects this. Also, I think that we've been able to do margin management pretty well over the past kind of a year after the tariffs and the currency changes with -- in particular related to U.S., impacted quite a lot our business. We continue to be very well on top of things and are well positioned for the future as we keep ramping the production of Muurame up.

And one of the examples of our channel development initiatives is that we want to do more of what works. And what clearly works very well for us is our own direct-to-consumer webstore in North America, and we've recently brought that to the German-speaking Continental Europe and the ramp up is progressing as planned.

One of the biggest challenges we as a company have is actually keep up with the growth. Demand for our products seems to be on a very good level and ability to keep growing significant numbers and do it in a productive manner is one of the key priorities of the management. And as we already covered, this IT and process upgrade in Muurame was a significant step for us, and I'm very happy to report that it went as planned. And as I mentioned in the beginning, we've already gone through the same in U.S. So now we have our biggest factories in the new era when it comes to the way Harvia works and the IT landscape that we utilize in our business.

And we continue to invest in building capacity. The biggest priority for us, obviously, is in U.S. as we can see that already for multiple years we've grown tens of percentages per annum. And it was easier to grow when you grew, let's say, 40% on EUR 10 million, but when you grow 40% on EUR 100 million, just the absolute steps obviously are much bigger. So this requires a lot of attention from us. And also, we need to move ahead of the curve so that we don't hit the ceiling and can capitalize on the opportunities we have.

So the investments and development activities that we've implemented, we believe, will enhance our capacity to grow scalability -- productive scalability of the business, operational resilience and also transparency of business steering through data. So we are very happy that we've now been able to take this step.

A couple of practical examples that I thought I'd mention. One is that we think Harvia could truly become the category leader of thermal wellness, sauna wellness worldwide. And part of that is that we want to advance what I would call the science of sauna. And there's been quite a lot of research done on, in particular, traditional sauna, the Finnish sauna, but there are also some blind spots. And Harvia partnered with the University of Jyvaskyla which is known for its sports science department and also the Finnish High-Performance Athlete Research Institute, KIHU, to keep studying and understanding more.

And one of the things that was not really studied was what's the impact of humidity for the biological response of a person who is in the sauna. There's been research on the temperature and the duration, how long you stay in the sauna, but not really about the humidity, and which is a very important part of both traditional sauna experience, so the water on the stone, what we call loyly, and also steam sauna category.

And it turns out that the impact of loyly is actually very important because we were really measuring very precisely the environment of sauna, plus we had 50 adults. They were actually, for example, swallowing a temperature sensor pill so we can measure accurately the core temperature. We were measuring skin temperature. We were measuring their heart rates. And we can see that roughly 25% of the heartbeat increase and core temperature increase is actually due to the humidity, which means that you can have clearly a lower temperature sauna as long as you use steam or water enough and get same response as in a hotter but dryer sauna. And this helps us design what I would call sauna wellness programs that are very pleasant and kind of just what the person needs and wants, so wellness in a pleasant way.

And wellness longevity in a pleasant and relaxing way is a value proposition that resonates extremely well across the world. And this is an example that Harvia has an opportunity to truly become the ambassador of this category.

The other example I wanted to mention is that we won, as mentioned, the Red Dot Design Award for the touchscreen control panel, Harvia Fenix, which as I said, hits really the sweet spot of working really nicely in a hot and humid environment through gentle touch user interface connected to the Internet, over-the-air software updates, et cetera, hitting the right price points and the sales response from the market has been very good for this product.

So now we go to the financials more in detail. So Ari?

Okay. Thank you. Yes. Here, we see again the seasonality of our business first a couple of years backwards. Typically, the quarter 4 or quarter 1 have been the highest quarters. And then last winter, quarter 1 was clearly higher than quarter 4. And typically, the net sales go a bit lower during the summer months of quarter 2 and quarter 3.

But that trend has changed probably a little. Sauna is not necessarily any more so much of the -- just winter product in the biggest markets, but it's also selling well in -- during the Q2 and Q3. But despite of that, we had really the delay of the net sales in Q2 of approximately EUR 4 million. And since that came from the production of sauna heaters, we have actually quite high operational leverage there. It had also a substantial effect on the relative profitability of that part of the business. So without that delay, we would have had substantially better Q2 figures. But we are happy also with this situation since the most important thing is really that we have passed the most important part of the project and the capacity is close to normal.

Here are the main financial numbers. And actually, there is not very much deviation from the last year. And one -- couple of things I would like to mention. Actually, the number of employees, it has increased about 64 employees and 59 of those came into the group in U.S. So we have been actually employing quite much new people in U.S. for the production, for the sales support and so forth. So the operations are growing very nicely there.

The net working capital was still on a, well, rather high level. And the fact is really that we had not reduced the inventory, but we had increased it practically, especially in Finland, to be prepared after the more peaceful Q2 production for the deliveries. So we had end of Q2 plenty of materials and work in process prepared for the future sales in Finland.

During that quarter, we also had some extra costs, as Matias mentioned, for the transition. We had a downtime of the production about 3 weeks. We were not shipping, not producing. And during that time, on the other hand, we also let people take their extra holidays and so forth in the production. So in fact, if you compare the Q2 in '25 and '26, our share of the direct -- or our share of the labor in total actually didn't increase. And at the same time, also the other operating costs, they were managed quite well during Q2. They were also relatively lower than a year ago.

Also due to the slightly unfavorable sales mix, more sauna cabins, less equipment, the material percentage of the sales increased slightly, but it belongs really to this restructuring or the pause of the heater and similar shipments.

Okay. Here, we see the seasonality of our operating free cash flow and cash conversion. And typically, after the Q2, Q1, we go down with the free cash flow. And now we had again lower cash flow in Q2. And typically, it increases rapidly during Q3 and Q4 when we turn the higher inventories to money and so forth.

The leverage is on a rather low level. We have plenty of room even to our financial long-term targets, 2.5, to take more debt if we want for some restructuring M&A or so, or we could also temporarily exceed even this 2.5. So it's not the upper limit, but it requires, of course, discussion and separate information if we exceed this 2.5. But -- so there is really firepower for acquisitions available.

The net financial items, okay, they vary sometimes based on the IFRS valuation of certain items. But really, the cash finance expenses paid in cash, they stayed quite stable also in Q2.

Here, we see the quarterly investments. And as Matias talked, we have had investments in IT infrastructure, expanding the Lewisburg facility, but -- and product development, but we have also invested in real production machinery, both in Finland and in U.S. and also some solar power equipment and so forth.

So the Harvia's long-term financial targets, just to repeat, they haven't changed. We target 10% or more average annual revenue growth rate and the profitability, adjusted operating profit margin over 20% and the leverage really under 2.5.

We pay twice a year the dividends. So this time, the Annual General Meeting accepted the Board of Directors' proposal to pay EUR 0.77 as dividends for last year's results. And the first installment was paid in April, EUR 0.39, and the rest is planned to be paid in October '26.

So now it's time for questions. We have got plenty of questions and quite much related to North America, understandable, but also for other regions and different product groups.

So let's start, and Matias will answer most of the business questions. And if there are anything financial related, I will answer them more.

So Q2 sales included EUR 4 million sales shift into Q3. Can you confirm that the EUR 4 million of delayed Q2 deliveries is now fully secured within the Q3 order book? Is there any remaining risk of volume shipping into Q4?

The answer is that I can't guarantee it. But I'm highly confident that majority of it will be delivered in the quarter 3, but there might be still some slippage. Overall, I'm very happy with how the transition went. It was very significant undertaking for us involving many teams, et cetera. And of course, when something like that happens in the core of your business, also the CEO gets a little bit butterflies in the stomach. And now seeing how the factory works, how the processes have now settled, I'm very happy. I think we are in a positive situation where at the same time we are catching up from last year and experiencing strong demand from the market.

North America grew close to 40% in Q2. And you highlighted the expansion of sauna cabin distribution as one of the key drivers. Could you explain this in more detail? Additionally, how did sauna cabin sales develop among your existing distributors versus the newly added distributors channels?

Yes. For sauna cabins, we have two main sales channels in the U.S., especially when we talk about the high-volume categories, easy to buy, easy to install products like the barrel sauna or also what I would call entry-level sauna cabins from the indoors. They mainly go through two channels, our own direct-to-consumer, and also we would call the big box retailers, so mass merchants in the U.S.

And we're actually taking steps in multiple ways. And one of them is that we have very significant growth in our own D2C. I think we've had (sic) [ hit ] the sweet spot in how we market, how we drive traffic to the store. We've made over the past quarters also improvements like having really nice 3D modelings where you can kind of design your own product based on the available options, see all the time how the price changes, fast deliveries, et cetera. And just the portfolio seems to be fitting very nicely. So what I would call product market fit for the products we make in Lewisburg seems to be very, very good. And one of the great channels is our own D2C.

Having said that, we want to grow in all channels. And I'm pleased to say that the partners that we have are very happy with Harvia. They also see the growth opportunities that the category represents. They see that we have a highly competitive portfolio that they can sell. They see that we have a track record of scaling and having the opportunity to scale with our partners. So there is also expansion activities having basically a stronger focus among our existing customers and also some that are new opportunities as customers for us.

Okay. Then there is a similar twofold question, probably answered already the first part, but I ask it anyhow. How much of the North American growth came from the distribution channel expansion? That was the first part. Is it right to assume that this had a weakening mix effect?

I think majority of the growth came from our existing channels. And I guess that's also a good sign that we've been able to scale our own channels and also existing -- business with existing partners. And there is also some element with new accounts.

The mix element had an impact on the profitability, in particular, the share of materials of our revenues. The reason being that the sauna cabins tend to have a slightly lower gross margin compared to our technical products like the sauna heaters, the control panels, et cetera. And that side of the business was now particularly significantly impacted by the essentially ERP program that went live and process improvement program that went live in our biggest technical equipment factory here in Finland.

Sales of the steam products were down 14% year-to-year in Q2. Has ThermaSol acquisition disappointed you? Why you have not been able to get out the sales synergies?

When we look at the steam, there's a few things to bear in mind. One is that before we acquired ThermaSol, practically our business in steam was in Middle East and particularly the Gulf region. And the reason is that steam saunas, Turkish saunas, Hammams, they are very strongly part of that culture in that part of the world. And then ThermaSol really added more like a steam element for North America. And actually, we had some hiccups when it comes to both.

So it's -- what you see in the reported figures is not only ThermaSol, but it actually a combined impact on basically significant project-based business being disrupted in the Gulf region. But at the same time, it is fair to say that we're not fully satisfied with the pace that we've been able to scale the steam business in North America. Multiple actions are underway. And as I mentioned, I would hope that we can report a positive trend change during even the second half of this year relating to the channel, the account management and also some activities related to portfolio development.

Now, what comes to ThermaSol, steam was one of the key reasons why we bought them. So as a global leader of the sauna category and kind of owner of thermal wellness, we feel that we need to have a portfolio that covers traditional sauna, infrared sauna, steam sauna and cold wellness products. So of course, strategically adding steam has been something we wanted to do, but it was not the only reason.

Also, we got some of the leading digital capabilities when we acquired ThermaSol. So when we bought them, they had beautiful Android-based kind of full-size, tablet-sized control panels to be used in showers and steam saunas, so really optimized for wet and hot environment. And that's something we are utilizing across the Harvia Group now. And the other thing was opportunities to sell more high-end products from Harvia Group portfolio through ThermaSol channel. And that's also actually progressing pretty well.

So we can't have too narrow kind of focus when assessing the performance of the acquisition. Of course, we would have wanted to gain some more, but we feel that there continues to be a strong potential in the acquisition that we made, which we plan to get through -- get into output -- business outcomes in the coming years.

Once the new capacity can -- comes online, should we expect a step-up in growth and mainly improved delivery capabilities and shorter lead times?

The answer is yes. And basically it relates to both, Lewisburg, which mainly -- there's two different, I would say, development initiatives that have been going on. One is expanding physically the Lewisburg factory. And basically, the current expansion phase is expected to be completed actually next month, so in the month of September, already helping us for the fourth quarter and first quarter kind of winter season that is coming.

And it is clear that we are preparing quite a lot additional products, finished goods as we approach that selling season as we hope that we can continue to deliver solid growth also during this winter season. And as I said, just the absolute jumps as the percentages -- growth percentages are quite high, actually quite significant as we keep growing strong double digit already on a clearly elevated base compared to where we were even some years ago. And that's Lewisburg, and we should have clearly more capacity for the high selling winter season.

And also, we believe that Muurame will have already more capacity in quarter 3 than quarter 2 and even more in quarter 4 as a result of the kind of our system and IT renewal. It's much more scalable, streamlined, automated, helps scale. Previously, we have been very much dependent on manual labor for scaling. And now we can automize, utilize more, for example, AI-driven smart business processes, et cetera. So we're very much looking forward to the productivity and scalability benefits from the project.

On the APAC and EMEA weakness, could you quantify in euro terms the total impact from the customer project postponed and delivery delays related to the Muurame factory upgrade during the quarter?

Well, what we can say is that the Gulf region represents roughly 2% of our revenue. So in '25 figures, it means roughly EUR 4 million in a year, EUR 1 million per quarter. And half of that is at risk for this year. So roughly speaking, EUR 2 million for the full year with, I would say, weighting now to more the second half of the year. When we put things in perspective, that represents roughly a 1% impact for our full year growth on a group level. And we don't separate now in our reporting kind of specific kind of impact from the Gulf situation to our EMEA numbers. But as said, overall, in the APAC region, we are performing well.

Still continuing the same topic still. Based on your comments that the Iran conflict is expected to continue affecting APAC and EMEA in H2, second half of the year, should we interpret this is implying that regional sales are likely to decline year-on-year in the second half as well?

Well, I just gave you the guidance and you do the math.

Yes. How did sales develop in other key APAC, EMEA countries like China and Japan?

Well.

Okay. What was the estimated Q2 impact from higher raw materials, freight and energy costs related to the Iran conflict? How do you expect those cost pressures to evolve in H2? And have you implemented any price increases to offset the higher input costs?

Yes. When we look at the crisis in the Middle East, we've been looking at it from multiple angles. One is impact on the global economy that could then impact customer -- consumer confidence, that then could impact our business. But so far in the key markets, when we look at the demand picture, it look -- continues to stay positive, which is the main thing for us. Then everything else, we feel we can manage reasonably well. Of course, as a company that has truly global supply network, we have two factories in the U.S., factory in China, multiple factories in Europe, also multiple suppliers of components. We've been optimizing our kind of supply chain to take into account the situation in the Gulf. So what comes to kind of core supply chain process is we think we can manage them without significant impact on the margins.

One element that is important for us is logistics cost because typically when we think about, for example, sauna cabin, it's a big and bulky product from a logistics point of view. There is some price increase pressure there. But overall, we've shown during the last 12 months that we can actually react, I would say, reasonably quickly to even very significant swings. And for us, it was a much bigger deal to deal with tariff fluctuation and tariff increases at the same time when the USD was dropping significantly during the earlier part of last year. So putting things in perspective, this is a much smaller thing for us.

Yes. There is sometimes strong volatility in the freight costs, but we have to also mention that quite a big part of that direction sales are sold with ex-works conditions. So actually, the customers organize the freight by themselves, and we don't carry the cost necessarily. So it's also mitigating that risk a little.

Where do you think the softness in steam market demand stems from? Are you seeing any market share losses?

One of the key things that drives demand for saunas is the awareness and excitement around the category. And when we -- we do actually a lot of analytics on what happens in the digital space, Google search trends, social media kind of assessments, et cetera. And what is quite clear is that there's a lot of activity in social media around the traditional sauna and infrared sauna and significantly less, for some reason, for the steam sauna category. So there is clearly more tailwind for traditional and infrared saunas than for steam. So basically, the way we see the market is that out of these three sauna types, steam is the slowest growing. And that's now been impacted globally in one of the heartlands of steam sauna, i.e., the Gulf region, because of the situation we already talked about.

Having said that, when we've assessed our situation, we think that there is also an element of competitive pressure, which we need to react to through account management, channel development and also continued product development. And we have a quite comprehensive multipoint action plan that we are implementing with our steam team. And I'm very much looking forward to seeing the trend improve clearly.

And right now, my estimate would be that we could see that already during the second half. Of course, it heavily is dependent actually on the Middle East Gulf situation. But overall, in the U.S., I think the trend change is doable within this year.

Can you comment on the sales mix in North America? How big share of the sales went to third-party retailers in Q2? Is the retail margin closer to Harvia's average margin? Or how would you describe margin in retail channel?

We think about our channel landscape in North America, it could be summarized in four: one, our own direct-to-consumer D2C; the second is the big box retailers; then third is what I would call sauna pool spa wellness dealers; and fourth is other sauna cabin manufacturers who need a heater inside their solution. And the big box retail is the biggest. Our own D2C is the second. The dealer is third and the sauna cabin is fourth. But all of them have a meaningful role.

And there are some margin differences across the channels, but mainly it comes from the product mix. So typically, the sauna cabin as a product has a slightly lower margin than the more, I would say, complicated technical products with electrics, digital, et cetera, embedded in them like the sauna heaters and the control panels.

Back to Persian Gulf region. What was the negative impact of the Persian Gulf region in Q2? And what run rate should we expect from the situation going forward? I think we answered in the [indiscernible], it's EUR 2 million on the annual level.

Yes, exactly.

Yes. Overall, are you content with the sales mix you achieved in Q2? Or do you see room to improve?

There's two answers to this. On one hand, yes, because I think that we really performed very well with the products where we have had availability. And on the other hand, no, because this Muurame go-live had a, obviously quite significant impact on the, what I would call the highest margin products we make in this company. So that obviously is visible. Whether that could have been managed somehow differently, I don't know. I think we did pretty good job.

And what comes to the gross margin development as we now have ramped up the production in Muurame continue to increase output, keep driving growth. I think you should expect basically positive outlook for the gross margin development.

How much inventory remains elevated due to the IT implementation and how much working capital release should we expect in H2?

We don't, well, release this so exactly. But I have to say that, for instance, in Muurame Finland, the increase of the inventory value during Q2 was multiple millions. And we are now really well prepared to start the sales for Q3 and going forward. And as you can see from our seasonality of the business and the cash flow, this tells also that typically, the net working capital goes every year down during Q4. So this will certainly happen also this year, but we can't give so exact numbers for that. That's the same phenomenon every year.

Regarding acquisition targets, what kind of valuation levels are you seeing at the moment?

The valuation levels change quite dramatically depending on what kind of target we are talking about. If we are talking about market leaders for high-growth categories in the U.S., there, the multiples are clearly higher. If we talk about maybe a smaller player in more kind of traditional sauna category, let's say, in Europe, basically less. At the same time, they would add less into our business strategically and then business-wise.

Now, of course, I understand that it's taking a while since our previous meaningful-sized acquisition, but it is also something that is quite sensitive to both macroenvironment and also sell-side circumstances and sometimes also buy-side circumstances. And if you think about, for example, last year, there was significant disruption to the M&A market due to the Liberation Day, the tariffs, the dollar. Many of the infrared players import a significant portion of what they sell from China and the Far East. So there was a lot of uncertainty around what happens to that.

Also during that time, on our side, our management was also very busy in managing pricing, et cetera, and adjustments to the kind of fast changing situation. There are, of course, multiple -- like multiple discussions going on. But as there are multiple variables, sell-side expectations, sell-side changes in business trends, buyside circumstances, it's very hard to give you an exact date when we could report something concrete, but we continue to work, and we are very well aware of the target universe and also generally kind of where the multiples are.

Typically, we would be looking at always kind of accepting lower multiples than Harvia. I think Harvia has through its kind of a multiyear journey in the stock market as a public listed company through transparency, through growth, through profitability, through resilience, justified multiples that are higher than the targets, that typically would be privately owned companies. So that's the way we look at things.

Could you give us an update on the high-end sauna rooms launched under ThermaSol?

Multiple design awards win, great exposure in interior design and architectural magazines in North America. So basically, the start is pretty good. Of course, it takes time to catch up as the, what I would call the standard volume cabin misses so significant. But part of what we see in North America, there is also a contribution from us playing also now more strongly a higher-end game than in the past.

The U.S. business. Are you now starting to see strong replacement demand you did not have before acquiring Almost Heaven Saunas?

Well, the way we look at things is that, roughly speaking, a replacement cycle for a sauna heater that's in private use would be maybe 7 years, 7 to 10 years. And our journey in North America and kind of if you think about just 7 years back, we talk about basically 2018, 2019, 2018 we had EUR 3 million business on an annual level. In 2019 we had a little bit more than EUR 10 million because we had acquired Almost Heaven Saunas. Actually, the base in North America is rather small. But it will come. It will come.

For the sauna cabin, there's also a replacement cycle, probably somewhat above 10 years. But that's part of the Harvia's long-term value creation plan that there is also replacement sales. There's also upgrade sales. So we also take an assumption that somebody has entered the world of sauna through entry price point product. They might be then willing to invest in an even better experience when it's time to renew. And that's something we actually see in many of the mature markets, that kind of dynamics.

Also, we are working on digital leadership, digital solutions for thermal wellness and sauna. And we also see a future where digital subscription, digital kind of service sales could also have a meaningful part of our revenue and profit profile.

Excluding the special items such as the delivery shifts and tariff impact in Q1 '25, your revenue growth has accelerated a lot while the consumer confidence, interest rates haven't changed much. Is this reflection or reflective of outside market share gains following the growth OpEx started in Q2 '24? Or do you feel that your initiatives have yet to generate meaningful returns?

I think Harvia is probably the most exciting company in this space for many reasons. And one of them is our product innovation where we put more effort some years back. And the pinnacle is visible now through products like the Harvia Fenix and also a much more competitive digital offering that we have, some really great design products, actually like the one in the background. We had this particular product line called Harvia Cilindro only available as an electric heater version, and now it's available in beautiful wood burning version as well.

So kind of we -- when we look at the portfolio what we have right now and what we had a couple of years ago, I think there's a clear step up. If you think about traditionally the, kind of the core sources of competitiveness of Harvia, we have been very much a product and production company. So good products manufactured and distributed in an effective way.

And we have also added, I think, more excitement in our marketing, more collaborations with social media influencers, more, actually quite groundbreaking and novel content like the sauna research that I talked about. If you look at the social media, there's a lot of repeating of the old studies. And what we now see is that when Harvia together with the research -- kind of research academies and universities -- and also Toyota Motor Company actually was part of the -- Toyota company was also part of the research team. They have a high-performance rally team in the region where we also have our head office. So we actually collaborate with Toyota on multiple areas. That research outcome has actually caught fire in the social media, because something new. And this is exactly what we want to do. We want to be the most inspiring, distinct player in this business with the highest brand awareness and brand preference.

And I think the work is progressing. And obviously, we're still early on in that journey. I think there's still much more potential for the coming years, but the direction is good.

In the report, you mentioned the expansion of the facility in Lewisburg, West Virginia progressed during the period and will be completed in late '26. This seems to be far ahead of expectations and what's going to be the impact? On a similar note, you have dramatically increased your headcount.

Yes. Basically, it's -- if you -- I could paint you a picture which basically is a chart of Harvia's revenue growth in North America from 2018 which was EUR 3 million to last year, which is roughly $90 million. And with this trend, assuming there's no massive disruption in the world, I think it's safe to assume it will be significantly over $100 million this year. And we continue to grow double digit. The absolute steps, as I mentioned, are getting much bigger.

And we -- what we've done is that around 1.5 years ago, we bought around 8 hectares of land. What is it in acres?

20.

20 acres of land around our Lewisburg factory to have options to grow. The next thing was we developed a site plan. What would it look like if we would be making multiples, not just 2x, not just 3x, but multiple Xs more sauna units in that site.

And then we basically made a plan backwards from that grand site vision. Now what are then the first meaningful steps, first bottlenecks we are hitting. And this particular phase that we are now completing relates to mainly warehousing and shipping. And warehousing because we need to prepare, again, a bigger finished goods inventory, as we go into the winter season, than last year to be able to deliver what we hope is going to be a good demand season. And the other thing is that actually the yard has been very busy with lorries or trucks. So we have now more like the shipment slots for trucks.

The next step is we're actually -- of course, already it's very much in our minds. The next step would be also increasing the production of floor space. But it's a kind of multiyear journey where we try to kind of, on one hand anticipate and move a little bit ahead of demand so that we don't hit the ceiling, but not take too big jumps at the same time. So kind of grow as you go, but still lean a little bit forward. That's the approach.

Another note, this person has been observing us quite closely. EOS has been hiring quite a few new employees over the past 2 months, about 6% as -- is my estimate. How has EOS been performing in the domestic versus foreign markets? And how can its new command control unit drive growth in infrared and steam outside the U.S.?

Yes. We basically have two global master brands. We have acquired a lot of companies and some of them came with the brand, and we decided to discontinue them, but we decided to focus on two brands globally, Harvia and EOS. Harvia is what I would call premium, but mass market and then a global market leader for sauna. And EOS is luxury, prestigious, both for commercial and residential use. And -- for example, EOS is absolutely beautiful, what I would call Aufguss saunas, sort of experiential saunas where -- which also include sort of Continental European sauna region called Aufguss. And we are, by the way -- we have been sponsoring the world championships of Aufguss last year in Italy, in Verona. This year it's going to be in Berlin, in Germany, and the main sponsor is EOS.

So actually, EOS is a brand, is really establishing a very interesting sort of distinct position in the sauna market that helps us capture opportunities, while also keeping Harvia's core brand kind of focused in what it does best, which is a premium product, but price points that really can drive significant volumes. And overall, if I'm looking at the multiyear performance of EOS, we're very pleased.

How will the CapEx evolve from here? And what's the capacity productivity impact from -- for your IT upgrade?

Okay. Generally, the CapEx, we have been saying that it's happening at minimum 4% to 5% of our annual revenues. But this IT really allows us to be more exact in material management and forecasting and planning the production. To measure it somehow in additional production capacity, it's a bit difficult, but it really takes us to the next level in our operations.

How substantial are U.K., Japan and Australia for the revenue mix today? Could you share the demand you are seeing from those markets such as underlying growth rate and your expectations for the future?

Well, we share our revenue by the four reported region and profit on a group level. So we don't go into very specific details. By the way, kind of a disclaimer is that while there's a lot of investors in this call, there's also our competitors. And we are, I would say, the lighthouse of this global sauna market worldwide, and the only pure-play public listed company as transparent as we are. So we are always balancing between giving relevant information that our shareholders can use to assess the performance and strategy execution of the company, while not giving away too much because as said, we know that there are multiple, multiple competitors always following our webcast and closely analyzing what we say. So this is the reason why we have made the decision to report as we do. But all in all, all of these markets have strong momentum.

Thinking about acquisitions, is infrared now more attractive than steam? Do you think less growth in steam in structural and why?

If I'm thinking about like the last 5 years, it is clear that infrared grew much faster than the steam. I think the key reason is actually companies in that space doing great marketing, building availability and the product is very easy to buy and install. It actually takes -- there's no water involved and actually the power consumption of the infrared panels is less than a heater for traditional sauna. So there's -- for indoor use, the easiest product you can buy is that -- the infrared sauna.

And in the other spectrum is what I would call higher-end steam saunas, which is pretty much always a bathroom renovation project or even new build house project where you have steam generators, piping systems, valves, et cetera, behind the walls. And I think there is significant impact on this easiness of installation, the price points and also social media exposure to different sauna types.

Now at the time when we were acquiring ThermaSol, it was also now or never type of a situation because actually steam sauna side has consolidated clearly earlier. So many of the smaller steam sauna players had already been acquired by larger companies and practically became unavailable for a buyer like Harvia. So we decided that we want to move there to secure a space in that corner of our global sauna market.

Infrared is very interesting. That's for sure. And there are activities on multiple fronts that we could strengthen our position in the coming years quite substantially.

If buying infrared in North America, what do we need, distribution channels, known brand in North America or something else? Could you build a sizable infrared business around Harvia brand in North America?

I think there are different options. Of course, organic growth is one and then M&A is another one. And then if you think about that, the infrared out of the three sauna types is the largest in North America, out of infrared, traditional and steam, the biggest market in terms of volume and most likely also revenue value-wise is infrared saunas. And we are already quite big. While we don't have, I would say, a meaningful footprint yet of the infrared sauna, you can imagine that there are actually some players that are actually quite sizable and us kind of building position from ground up, starting from low levels, we anticipate that even if we would be utilizing our operational capabilities, marketing, et cetera, it still will be a long-term catch-up game.

So because of this reason, we feel that there is a need for, what I would call growth platform. I would say, significant step forward doesn't necessarily have to be the biggest player, but has to be a meaningful player in that space that we could use as a clear accelerator, both in terms of market presence, sales competencies, portfolio.

Infrared is, actually in terms of selling, it's almost like -- it really is the farthest in this, what I would call a wellness game. And basically, the way infrared products impact in the sort of consultative sales sessions where customers book free wellness consultations through online and then get a call from an infrared sauna sales consultant, that is a machine. We've seen it in actually multiple of the infrared sauna players. And there are opportunities, both in actually portfolio, footprint of the market, sales competencies, commercial engine, et cetera, that I think we would benefit acquiring.

And now the last question. When will you get tariff refunds from the U.S., please?

The fact is that we have applied and we are studying these opportunities. We have got small amounts of the tariffs paid last year already back, but it doesn't really change anything essential in our numbers. So just small amounts. And there -- we study then there are future possibilities to get more back.

So thank you very much for following.

Thank you very much, and have a great day. Let's sauna.

Yes, let's sauna.

Hello, everyone, and welcome to Harvia's Quarter 1 '26 Earnings Webcast. My name is Matias Jarnefelt. I'm the CEO of the company. And with me, I have Ari Vesterinen, our Chief Financial Officer.

Hello.

We will run today's session as follows. I will start presenting by going through the highlights of the quarter 1 business results, financial performance and also steps we are taking to implement our strategy and build Harvia's future. After that, Ari will go through the financial numbers in more details. After which, we are ready for your questions. And as usual, you can submit your questions in the chat box in this webcast window.

So let's get going. Quarter 1 '26 was a good quarter for Harvia. Our revenue increased by 12.7% to EUR 58.6 million, and that represents our all-time high in terms of revenue so far. All growth was organic and revenue grew by 18.3% at comparable exchange rates. We grew in all of our 4 regions that we report and particularly strong performance in euros was in APAC and Middle East and Africa and Northern Europe. Dollar depreciated a lot versus quarter 1 last year, around 10%, and that negatively impacted our reported sales that we report in euros. In local currencies, North America grew by over 20%.

During the quarter, we delivered also solid profitability by delivering adjusted operating profit of EUR 12.9 million and that represents exactly 22% of our revenue. Profitability was supported by strong revenue growth, which outpaced the increase of our operating expenses and also by solid gross margin management that was supported by the actions that we have taken during the last year and also during the quarter to offset the impact of the tariffs and also currency fluctuations that have been quite significant during the past 12 months.

We have also taken steps forward to implement our strategy and build Harvia's future. That includes systematic investments, for example, in capacity. We have ongoing activities in our Lewisburg factory in West Virginia to expand the capacity as we then start to prepare for the high selling season of the latter part of this year again. We are investing in product development to make sure that we have exciting innovation to bring to the market. And this includes also that we are building and strengthening our IT infrastructure and business processes. And the purpose is to improve productivity, scalability and operational resilience as we keep growing this business.

As a part of this development process, the Muurame factory, which is our main heater manufacturing facility in Central Finland, will go live with the new operational IT system during the ongoing quarter, so quarter 2. And this transition to the new systems and processes is expected to temporarily extend delivery lead times and shift approximately EUR 3 million to EUR 5 million worth of deliveries from quarter 2 to quarter 3. Also, there will be some temporary operational expenses from this upgrade process that will be visible in our quarter 2 figures. All in all, Harvia is very well placed to continue to lead and shape the global and growing sauna market.

So summarizing the key figures from quarter 1. Revenue, EUR 58.6 million, and that represents 12.7% growth at comparable exchange rates, as already mentioned, 18.3%, and all of this growth was organic. Adjusted operating profit of EUR 12.9 million, and that's 22% of our revenue, and that represents operating profit growth of around 8% from the comparison quarter. Healthy operating free cash flow at EUR 12 million, and that's 80% cash conversion.

We delivered growth throughout the world across all of our reported geographical regions. And out of our 4 reported regions, 3 grew by double-digit. The largest absolute contribution came from region North America that grew by 12% in euros and over 20% in local currencies. And also Northern Europe contributed significantly by growing EUR 2 million over last year's figures. APAC and EMEA continued strong double-digit growth at growing nearly 30% and Continental Europe continued to deliver rather modest, but steady growth figures.

Then I will go through each of the regions briefly. So Northern Europe now represents 24% of our total revenue and revenue increased by nearly 17%. Why is this happening? I think one of the explanation comes from looking at the baseline. So we have had rather difficult 3 years in the region, and we believe that this has caused building up of pent-up demand in the region, which is now starting to turn into a real order flow. In addition to that, we've been working systematically to build our commercial access in the region, and that includes finding and building new channel partnerships. And one of the examples is a very successful channel expansion that we've been able to build in Sweden.

In Continental Europe, the progress is steadier, but still rather modest with 6% growth over last year. And Continental Europe represents now 26% of our revenue. We see quite significant differences when we look at the countries inside the region. This time, the strongest performance was in Germany and the United Kingdom, while in some of the Western European countries like France, we saw slower development. When we look at our product portfolio and brands, we can see that EOS, which is our high-end brand for commercial use and also premium use in homes, performed particularly well.

Then to North America, which I'm sure interests you a lot. So essentially good growth continued. We grew by 12% in euros, and that's over 20% in local currencies. And just a remark that in North America, we have 2 currencies that we use. One is U.S. dollar and we have also business in Canada where we sell in Canadian dollars. Now when you look at the baseline, you can see that we had very steep baseline to beat now this time. We grew by nearly 60% in quarter 1 '25. And in addition to that, we had to work against depreciated dollar. And despite that, reported growth was 12%.

Where did this growth come from? First of all, we had very strong performance in our heating equipment business, which is the traditional core of Harvia. And we were able to fight a very, very high baseline in our sauna cabin business from last year. We had some weakness in the steam business, particularly, there was 2 reasons. One is the dollar. And in local currencies, steam performance was rather flattish, but below our expectations. That was impacted by some slowness in certain key accounts for the steam products. But then again, it's also rather small product category, so quite small differences in absolute orders have quite significant impact on the percentage.

APAC and EMEA, continued strong growth at growing nearly 30% and now representing 8% of our revenue. The growth was coming in particular from the big countries in the region that we are systematically building for the future, and that's China and Japan. Of course, in this region, we have also the Gulf region. However, Gulf region represents only around 2% of Harvia Group's total revenue. We saw a slight decline in revenue in the Gulf region during quarter 1. But as I said, in the big picture, it didn't have a material impact.

So then briefly looking at the kind of product portfolio, strongest performance in heating equipment that grew significantly, now representing 57% of revenue. Saunas and Scandinavian hot tubs 22%, steam 7%, accessories and heater stones 6%, spare parts and services 7%. And here, we have the growth bridge. And as you can see, clearly, the biggest contribution to our absolute growth came from heating equipment. The demand for our products has been very solid across the world.

In saunas and Scandinavian hot tubs, as mentioned, dollar was a significant factor as saunas and Scandinavian hot tubs mainly revenue comes from United States. We also had very high baseline to beat. Steam product has similar currency effect since steam products we practically sell in the United States and Middle East, where dollar is the currency we use in both of those cases. And as mentioned, there was some softness in orders from certain key accounts in the United States.

So what about the strategy? The strategic positioning of Harvia is that we are a global leader in growing market that has very strong fundamental growth drivers that we believe will be helping us for many years to come. In this business, we want to have an offensive strategy where we shape and lead this market. And we want to do that by excelling in 4 areas: one, answering the question what, which relates to our products and portfolio leadership; where, which answers the questions which are the countries where we focus most, so countries that matter the most for the future of this business; to whom relates to our commercial execution, so in which channels we play with which brands; and how relates to our operational excellence and competence development.

And we've been systematically working on our strategy again also during this quarter. And I'm very happy to report that when we look at, for example, the performance that we have had in the heating equipment part of our business, there is significant contribution from the new products we've been introducing to the market, for example, during last year. And one particular product to mention would be Harvia Phoenix, which is a full touch control panel optimized for sauna use and in really sweet price point for the market. Also, EOS-branded premium and professional products have been performing very well.

When we look at the geographies, of course, we are glad to see that despite lower consumer confidence in North America compared to many years before '25, we've continued to see strong demand from the end users to our category. This is a story of pleasant relaxing wellness that improves your physical well-being and also mental well-being is something that really resonates very well across the world, but also particularly in North America.

In APAC and Middle East, we're very happy to see that the markets where we focus on keep delivering results. So China and Japan, where we have quite significant own presence are leading growth countries in that region, providing significant future growth opportunities. Continental Europe, rather steady progress, but positive progress. And maybe jumping to the leading in key channels. One of the things we're now doing in Continental Europe is bringing direct-to-consumer online store by Harvia to certain selected Continental European markets to inspire the market and also replicate a very successful business model that has been helping us for many years already now in North America, so D2C easy-to-buy products.

And in Northern Europe, this was now the third double-digit consecutive quarter, starting from quarter 3 last year at 14%, 11% in quarter 4 last year and now this nearly 17%. And best-in-class operations, great people, of course, is the foundation. We've been continuing the investments, building and expanding our facilities in Lewisburg, West Virginia as an example. And I will be talking in a couple of slides from here a bit about the IT infrastructure process.

So this is an example of basically doing more of what works. So in a simple terms, if you think about strategy, replicate success cases and then change things that don't work. And one of the things that really has been very good for us is our own direct-to-consumer online stores where we sell easy-to-buy, easy-to-install products, beautiful products that fit very nicely in your homes or in your backyard that are also very easy to install. So we now are replicating the business model in now Germany and Austria with the intention that we will be also rolling this to new countries in Continental Europe in the coming months and years.

And then let's talk a bit about the IT infrastructure and business process -- project that we have ongoing. First of all, why are we doing this? The reason is simple, Harvia is a global leader in significant growing market. And we believe that we can grow Harvia significantly in the coming years. That means that we have to have IT systems and processes that support efficient scaling. So significant scaling and profitable scaling. And that's why we're making these upgrades and changes. So we'll have a modern, scalable IT platform, including process architecture that enables growth and expansion. It will help us even further increase the level of optimization across our business processes, not just in the production, but also many of the other core business processes, and will prepare us for the future so we can use increasingly AI-driven capabilities to drive growth and drive profitability.

It will also provide benefits in improving our operational resilience by having a very robust, standardized, integrated and modern system in place. It will help us also in terms of business steering, will provide us better transparency, real-time transparency to our business and different aspects of it and will enable faster and higher quality decision-making. And ultimately, this should translate to a better ability to serve our customers with higher quality, speed, consistency, a very competitive offering.

Now this is quite significant piece of work for us, and it will have an impact on our deliveries during quarter 2. It will include such things as actually ramping down production for a temporary period of time in Muurame, transforming the systems from the old to new and then ramping the production up. And because of this, we estimate that there will be roughly EUR 3 million to EUR 5 million worth of shipments shifting from quarter 2 to quarter 3. And this will, of course, move also the related gross margin from quarter 2 to quarter 3. And as we will be working actually long hours, there's not going to be savings in the, for example, employee cost.

The direct labor is still present and basically doing these transitions and ramp-ups. So we also expect that there's going to be some impact on the OpEx level as well during the quarter 2. However, this is very well planned. The customers have been informed in advance. We have confidence that we will not be losing any sales. So while this would have a negative impact on our quarter 2, it should have a clear positive impact on our quarter 3. And in addition to having kind of the sales back in the quarter 3, we believe that this transition to the more modern system, more efficient and scalable system will start to pay back rather soon.

So with that, I would hand over to Ari.

Okay. Thank you. So this was actually a great quarter. It was an all-time high quarter in terms of sales. And I actually checked back older quarters, it was the second highest quarter in EBIT, absolute value of EBIT. We have been on a higher level in EBIT percentage of sales, but only once in terms of money in EBIT. So the growth compounds also in the profitability.

Here, we see now the key figures for the review period. As you have already noticed, we were able to keep quite a good level of profitability in adjusted operating profit and the cash conversion improved also. And net working capital, we have been increasing it due to the sales increase. And number of employees has gone also slightly up, but far less than how much we have been increasing the sales.

Here, we see the seasonality of the operating free cash flow. And now if we add those 2 last quarters, quarter 1 and quarter 4 together, we land to a free cash flow of EUR 25.3 million, and it happens to be actually quite the same amount of money what we had a year ago free cash flow during the 6 winter months. So Harvia has a strong cash conversion and the free cash flow concentrates mainly on the winter months. And yes, now we are going down to the Q2, Q3 as in the past.

The leverage is actually on a rather low level. It's the pre-ThermaSol acquisition level already 1.0. And just to remind that our long-term leverage target is to keep the leverage under 2.5. That is set up by our Board of Directors, but we could also temporarily go over that. And we would have also easily additional funding needed -- additional funding available from our banks if needed for acquisitions or whatever.

The net financial items, the dash line actually shows more the cash effect. They have been quite steady lately. And we have had 2 interest rate swaps, and they will mature now, the first one end of this year and the second one in summer '27, as stated in the interim report. The first one is rather favorable, the second one is quite market terms. We will renew them and try to keep really steady interest costs also in future.

The investments during Q1 were much lower than end of last year and also slightly lower than in Q1 '25. And as Matias already mentioned, we have been investing in IT infrastructure, product development and expansion of the Lewisburg factory in U.S. And the need of expansion continues due to the increase of production output.

Here once more, our long-term financial targets; annual growth of 10% or more profitability, adjusted operating profit margin over 20% and leverage under 2.5. And yes, we pay twice a year the dividends and the first dividend payment for this year happened actually now end of April '26 and the second installment is planned for October '26. Well, the dividends have been growing continuously.

So now it's time for questions. I've got actually quite much written questions already from -- mainly from our analysts, but there are also some investors. Matias will answer more of the business-related questions. And if there are any finance or such questions, I will answer them.

The first one. Sales of steam products declined, and you pinpointed to lower sales to some key accounts in the U.S. What was the main driver for that? Retail reluctancy to grow inventories, brand losing steam, overall weaker -- brand losing steam, overall weaker sellout at retail? Please tell us specifics.

Well, if you think about the channel landscape that ThermaSol has in the United States, we have a few quite big retailers, for example, moving plumbing products, a lot of smaller I would say, mid-market dealers and some special builders. And when I'm looking at this channel landscape, I can see that actually the 2 other channels, which is special builders and more like the mid-market dealers have been -- that has been performing well. However, with a very few key accounts that we have, that was the area where there was softness.

I think it's a bit too premature to make any, I would say, long-term conclusions out of it. As I said, it's rather small product category overall for us, and this is basically just 1 quarter. So of course, we are working very hard to make sure that we keep good growth momentum in all corners of our business, including steam, where we see a good strategic potential for us to grow in many parts of the world.

And maybe I would also point out that when we look at ThermaSol performance, internally, we see also non-steam products that we can actually get to the ThermaSol's traditional channel. And there we see quite positive development. So overall, our assessment is that we are making good progress. Having said that, of course, there's a bit of a fluctuation between quarters.

Okay. Was there anything in Q1 revenue that kind of would not occur again later in the year or was everything just driven by robust normal demand?

There's nothing particular to mention. I think one question might be that since we informed the customers about the longer lead times during quarter 2, whether that has turned into what I would call advanced buying. But as we've been analyzing that, our assessment is that didn't have any significant impact on our quarter 1 results. The impact will be seen this quarter, quarter 2 and quarter 3. And hopefully, we will be able to catch up fully by the end of quarter 3. Of course, that remains to be seen, but we feel fairly confident about that.

You mentioned that inflationary pressures did not meaningfully impact Q1, but how about the upcoming quarters?

Well, maybe a comment that we've been actually in a bit of a catch-up mode since beginning of last year, so '25. And that relates mostly to our U.S. based business, which was impacted by the currencies and by the tariffs. So that actually meant for us that we had temporarily dip in profitability during last year, and we've then been building it back through various commercial actions, including pricing management, including portfolio and assortment management, transitions to higher-margin products, et cetera.

I think it shows our ability to react. We continue to stay very vigilant on what's happening in the market. And we try to also be proactive. And I have fairly good confidence that we will be able to manage also in the future. Of course, if there's big swings in a short time period, there usually is some time lag, as I think our last 3, 4 quarters show. But in the bigger picture, we should be in a good position.

You indicated revenue, some EUR 3 million to EUR 5 million, deliveries shifting from Q2 to Q3. In which geographical areas we should see this?

It will be visible in all the regions. Muurame is our main heating manufacturing site shipping globally. Now then if you look at geographies and kind of the weights of different product categories in each of the region, we can see that in the U.S., there is a very significant part of full sauna cabins and sauna kits, plus steam plays a bigger role. So relatively speaking, it should have a smaller impact on U.S. And then if you look at, for example, North Europe, the business mainly is heating equipment business that we have in this corner of the world. So of course, relatively speaking, it impacts a larger portion of the regional business in North Europe. And then the other regions are in between.

Okay. Then profitability question related to this. Can you quantify the profitability impact of the postponed deliveries in Q2? Is the margin below, above the group level? Is it possible that some of these deliveries were delivered already in Q1?

Well, the information that we have given in the release is the information we've given. Basically, this is something that you should be using in building your modeling. But ultimately, the logic is as follows, there will be less deliveries from Muurame. Usually, when there's changes in the volume of our production, we're actually pretty good at managing also all the direct costs. But in this case, the direct labor is actually working pretty much throughout this transition. So there will be lower deliveries, and at the same time, direct labor will be actively working. And there's also then some additional support from our partners that we will be basically buying to support us in this transition. So there's also some OpEx sort of indirect OpEx impact also during the quarter. So that's basically the logic that you should think through. And then our target is that then we would see a good rebound as we go to quarter 3.

ThermaSol has been part of the group for over a year now. And you have previously said synergies are ahead of plan. However, the steam category has been soft, partly explained by the ForEx headwind, but that does not fully explain soft trends at key steam accounts in the U.S. Can you explain what is behind the weakness and your actions to improve ThermaSol's performance? Would it make some sense to first drive improvement at ThermaSol before looking at further M&A as this may increase execution risks for the group?

Well, first of all, steam, as said it's not only ThermaSol. We had steam business already before that and a significant part of that has been in the Middle East. And so steam category does fluctuate quite significantly depending on, for example, project deliveries. And in the bigger scheme of things, Harvia has, I would say, a meaningful project business only in the Gulf or Middle East region. And usually there, we have actually a significant steam component. So when you look at the steam, it's not just ThermaSol.

And the other point is that we had 3 logics for acquiring ThermaSol. One is enter and grow the steam category. The second is use ThermaSol's channels for cross-selling because ThermaSol had, I would say, better access than Harvia used to have for the higher-end homes and certain commercial end users as well. And then thirdly, use their digital technology to strengthen differentiation, not just in ThermaSol's part of portfolio, but also more broadly in the group. And there are many things that have been going very well.

Now of course, would we like to see more? Of course, yes. Do we have plans to accelerate? As in many parts of our business, yes, we do. And they include, of course, commercial actions, sales actions, also continuous development of the portfolio, sometimes also certain clarifications of frozen responsibilities to make sure that we work as effectively as we can. And hopefully, in the coming quarters, we would be able to tell a story through also numbers that things are working.

Which channels and product groups contributed the most to North American sales growth? Where do you see the most traction going forward?

Well, as can be seen in the growth bridge when we look at the product categories, the heating equipment was clearly the driver overall globally. And that is the case also in the Northern European -- Northern American market. So the biggest growth came from our heating equipment business. Having said that, when we look at the cabin business, as I pointed out, we had 60% growth or 59% growth in the quarter 1 '25, where there was a very significant jump in the cabin business revenue. So we had a very tough comp from that growth baseline plus then, of course, the currency sort of minus 10%. But as I said, it's -- heating equipment was the driving factor. But all in all, when we assess the momentum across the product groups, we feel confident and positive about the future of each of the category.

What is rough estimate for Q2 temporary costs related to IT upgrade, excluding the volume component?

Well, this guidance that we've now provided is the guidance we give. That you have to just take and think it through. Now maybe you would have a question that why did Harvia now give some indication of what's happening in quarter 2 when we usually don't provide any kind of short-term guidance. And there's a rationale why we usually don't provide any short-term guidance, and that is the nature of our business. We are in rather dynamic quick-based business where typically kind of order books are rather short and delivery times are quick. That is very different to running, for example, heavy machinery business where you have an order book for maybe 24 months. And you can quite easily then calculate how much of that order book you will be turning to revenue during the quarter at hand.

So that's kind of the fundamental reason that the business is very dynamic, and we built the company very much for the long term. However, in this case, we decided to make a bit of an exception because this is something that is purely Harvia's own decision that, of course, would have come as a very big surprise also to the market. And it has nothing to do with the market dynamics, rather a significant upgrading of our processes and systems. And we felt that it's the right thing to do to share that this is going on pretty much as we speak.

Can you explain the Lewisburg expansion in practical terms? What was your production capacity and utilization before? And how much additional capacity will the expansion add?

Well, when you look at our track record in North America, it is, of course, quite impressive. If we look at simply numbers like we bought Almost Heaven Saunas end of 2018. And if we just simply look at then from 2019, so post-acquisition to the end of last year, our average growth rate in the region has been in the range of 35% CAGR per annum.

It was quite easy to grow when we had a lower base. So growing on EUR 10 million, 30%, 40% means just EUR 3 million to EUR 4 million additional revenue for the next year. But when we start to get closer to, say, $100 million and beyond, of course, the jumps are quite significant. And we have been now systematically working on our capacity planning for North America to be able to sustain this growth.

As part of this work, we bought a significant piece of land around our site. It was at the end of '24. And basically, since then, we've been doing site planning. So we have actually a vision of how the site will look like when hopefully we will be much bigger than we are today. And we have now started the expansion, prioritizing areas where we would have hit the capacity bottlenecks the quickest. In this case, it is actually warehousing and shipping. This business is rather seasonal. And that means that we need to be able to build enough ready-made products in the inventory to be able to sell and ship it quickly.

And also then we, during the high season, have many trucks coming and going. So this is what is now happening on the site. So during the spring, we'll finish this part of the project. And then we are looking at the next steps and balancing that with the growth outlook. But overall, you should expect that investments in further growing our site in Lewisburg will continue in the coming years.

Then another question to the temporary costs, which the magnitude, okay, we didn't tell it exactly. But then is it reported as non-recurring item or part of recurring earnings?

It's actually not a non-recurring item -- reported as a non-recurring item. It's either in the normal operative costs or partly activated as a long-term expenses and will be amortized over the time. So it's not an NRI item.

How the tariffs for U.S. export business recently changed?

Well, it's been a bit of a rocky ride or fast ride. So basically moving from having 4% tariffs for our products. We're talking about heating equipment in particular because the sauna cabins we make domestic inside the United States. So the category that we mostly import to U.S. is the heating equipment. And we used to have a tariff scheme of around 4% before the beginning of last year, so since a year ago. Then the tariffs have been coming and going at some point in time, clearly above 20%. So actually adding 15 percentage points to our kind of landed cost in the United States. At the moment, the effective import duty rates for our heating equipment is actually around 14%.

Now I would also then highlight 2 things. One, around 2/3 of our sales in the United States is the cabin -- sauna cabin business, which is basically domestically produced. And then the heating equipment that we ship to North America actually goes to 2 destinations. One is our own distribution center. And if that's the destination, then we will pay the tariffs. But also, we have container customers, and we ship to them and they pay the customs.

Yes. And it has also been concluded that partly the tariffs in the past were not totally legally acceptable, and there might be possibilities that some industries and companies get also the overpaid tariffs slowly back through court decisions or through applications. But we are looking for -- what are our possibilities there.

What is the financial impact of postponed deliveries in the Middle East?

Well, overall, as I said, the Gulf region, Middle East represents roughly 2% of our global revenue. And if you think about -- put it in the context of last year, we had EUR 200 million revenue. That then equals to around EUR 4 million. And by quarter, it's roughly EUR 1 million a quarter. We did lose some hundreds of thousands in the Gulf during the quarter 1. And depending how things will go, it is likely to cause some disturbances in the deliveries. However, as said, in the bigger scheme of things, it's not very material.

The Middle East conflict this year compared a little in a lengthy question with the COVID boom when people were spending a primary time at home and so not traveling abroad. Do we see that kind of phenomenon now like during the COVID years?

Due to the Iran situation?

Yes, due to the Middle East situation, yes.

Well, we haven't observed that. The kind of the way we think about it is that there's, on one hand, the direct impact on our business in the Middle East, which I just commented. And then, of course, the indirect impact. We feel that the biggest impact would come from inflationary pressure, for example, ocean freight, energy, general inflation and potentially impacting consumer confidence.

Now when it comes to inflationary pressures, we are vigilant, as mentioned earlier. So we then will do our best to make sure that we have the right commercial actions to also protect our margin even in inflationary scenarios. And then when it comes to consumer confidence, I think the story that we've now shown in the United States during, for example, past year in '25, we grew by 22% in euros and around 26% in dollars, '25.

When the consumer confidence was already significantly lower than in the -- actually several years before that. And we now reported the results that you can see. It, in my mind, confirms our assumption that our category is rather resilient to overall consumer confidence and the value proposition that we have, which is well-being and health, both physical and mental in enjoyable relaxing way is something that resonates really well and that this category is just in the very early phase of development. And since there's so much market to win, we feel that we are well placed even in a world where the overall consumer confidence might be somewhat impacted by the Iranian situation.

Then a little discussion about the sales shifts between Q1 and Q2. Did you see any shift in demand during the quarter because of Iran and the other -- and otherwise, because of the IT upgrade?

Well, the Iranian situation is that we were not able to ship everything that was planned because the customers were not in the position to be able to receive the goods. So it did have an impact on our quarter 1 and most likely will have some impact on the quarter 2. As I said, in the bigger scheme of things, we talk about a region roughly EUR 1 million per quarter, and it's not impacting the whole region, Middle East that we report. It's quite specific projects and specific customers.

When it comes to the operational IT system process upgrade, we did inform the customers during quarter 1. We've also been observing because, of course, we are quite interested in understanding also how much is the potentially advanced demand so that we can prepare better for the quarters to come. And our assessment is that it didn't have a material impact on the numbers we reported and the numbers will be impacted in quarter 2 and quarter 3.

Matias, during the AGM, you mentioned that continued P&L investments are required to scale the business. However, you are running ahead of your model of around 10% sales growth. Is there more upside risk to your outlook on operating leverage or will you accelerate investments even more as the growth keeps running in the midterm percent?

Well, overall, the way I see this is that we are -- we have an extremely, extremely attractive position to play. We're a global leader in a growing category where we see growth opportunities in many dimensions. One is in terms of products, product leadership and portfolio and expanding the product categories where we play. Second is growing in significant size markets and also building our channel landscape. And for example, Sweden is an example that finding the right partners can really have a quite significant impact on the commercial success.

Now we have our long-term financial targets, which basically says that we aim for double-digit growth. We are ambitious and hope to deliver strong results in the coming quarters. At the same time, it's not going to happen just by waiting for the orders to come. So we are investing actively. And there's kind of -- the way I see it is that if we are reporting below 20% EBIT margin, then it's not something that we planned. We try to keep delivering above 20%. But then again, if it goes significantly above 20%, then my judgment would be that we have been underinvesting and being too cautious.

So that's pretty much how we see it. We want to keep investing over the next 3 years quite offensively while still delivering short term. And then as we hopefully will be clearly bigger company than we are today, then we really see the revenue growth, gross margin going through all the way to increasing EBIT, not just absolute, but also margin.

Then there is quite a detailed question about the tariffs. What are impacts of tariffs in Section 232 in April?

Well, I have to say that we have been working very actively in our operations and in our administration on the tariffs, and it keeps us busy. But frankly speaking, we can't answer all the details right now here. But I understand that the tariff situation interests all market parties. And when we have something definitive to report, we will certainly tell more.

Okay. A couple of questions, which have been more or less like answered already about the IT project. There are talks about U.S. tariff refunds. What is your view on this?

We have heard about that too. Yes.

Okay. These were the questions right now. Thank you very much for participating, and thank you for your interest.

Thank you.

Hello, everyone, and welcome to Harvia's Quarter 4 '25 Earnings Webcast. My name is Matias Jarnefelt. I'm the CEO of the company. 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 4. 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 off this webcast.

Let's summarize quarter 4. In terms of top line, our revenue increased by 5.3% to EUR 53.7 million, and we delivered positive growth in all regions. All of the growth was organic. The currency exchange rates, in particular, the U.S. 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 4 '24, we grew by over 60% and around half of it, so around 30% was organic growth. 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 Harvia's fastest-growing region during this quarter. In Asia Pacific and Middle East, we posted only a small growth. This was in particularly impacted by project deliveries in our Middle East subregion.

In terms of the bottom line, we delivered adjusted operating profit of EUR 10.5 million, 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. 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 clearly stronger gross margins than in the comparison period a year ago.

Then summarizing the full-year '25. 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. 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 deliver 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. While market conditions most likely will remain volatile also this year, personally, I feel that Harvia is very well positioned to drive profitable organic growth and also pursue disciplined inorganic opportunities as they might emerge.

Then summarizing quarter 4 key figures. Revenue, EUR 53.7 million, and that's growth of 5.3% in euros, and at comparable exchange rates, it's a growth of 10.2%. Adjusted operating profit at EUR 10.5 million, and that's growth of 20% compared to the comparison quarter a year ago. In terms of the margin, we delivered 19.5% adjusted operating profit margin. Operating cash flow was at good EUR 13.3 million level, which is over 100% cash conversion.

The same figures for the full-year. Revenue at EUR 198.9 million, so very, very close to EUR 200 million mark, 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, EUR 39.1 million, and that's 19.6% of our revenue. Operating free cash flow at EUR 26.5 million, 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.

Then looking at the waterfall of growth from our 4 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. As I said, there was a significant baseline from last year and U.S. dollar depreciated by over 8% against euro when we look at the comparisons between quarter 4, '24 and '25. 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 Middle East, and the Middle East subregion reported minus 60% development due to the baseline effect, while our strategically important markets, like China and Japan continued to grow double digit.

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 3. The revenue increased by 11.6% to EUR 12.1 million. I'm happy to report that the growth in Northern Europe was broad-based geographically, where Scandinavia, Finland and Baltics all performed well. On a full-year level, Northern Europe returned to growth of 6.4% after 2 years of decline and second half was clearly double-digit growth half of the year.

Continental Europe growth continued in -- 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 EUR 15.8 million, and that's 5.7% growth. The growth for the quarter is also very close to the growth for the full-year, which was 5.5%.

Then here is the North America region, I know that most of you are very interested in. As I said, the reported growth slowed down to around 3%, but you can also see in the graph that we had a significant jump in the comparison period when we grew by 63% and around half of that was organic growth. Last year or '24, significant part of the growth was coming from very aggressively priced campaign products. I'm happy to say that we grew in dollar terms, double digit, while we improved significantly gross margin in the region. That gross margin improvement in North America is also visible in the 3 percentage point improvement in the gross margin of the whole group, which I'm very pleased about. 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 East and 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 '24. 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 digit also during quarter 4 of '25. 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 continue 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 a 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 a year ago. Steam products, accessories and heater stones and spare parts and 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 a majority of the growth by adding 13% or growing by 13% and adding EUR 3.4 million to our top line. Saunas and Scandinavian hot tubs declining by around EUR 600,000, as said, mainly due to dollar impact and high baseline. Steam products, minus EUR 600,000, and this is very much driven by actually Middle East project that was significant in size in the comparison period. 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 stones and spare parts and services reported slight growth. That's about the numbers.

Then a few words about the strategy. Harvia is operating in a very interesting market business that is supported by strong, sustainable long-term growth drivers. We are a leader of this business globally, and we intend to remain so. 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. We drive this strategy through our 4 focus areas that answer the question is 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.

We have been executing systematically our strategy throughout the year, and that work continued also in the quarter 4 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 innovations such as the Harvia Phoenix control panel that you saw in the introduction video before we started the presentation. The sales started in third quarter, and it's showing really great performance during the quarter 4, 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 sauna sensor, which I'll be talking a bit about in the next slide.

In terms of winning in the strategically important markets, North America delivered double-digit growth in U.S. dollars also during the quarter 4 despite the baseline. For the full-year, around 26% growth in dollars. That's, I think, a testament that we continue to perform well there. APAC, it was a slower quarter in terms of reported figures, but there was that impact from Middle East. 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. Northern Europe, after 2 years of decline, turned back to strong growth during the second half of the year, where both quarter 3 and quarter 4 recorded double-digit growth. We've also been upgrading our direct-to-consumer digital touch points, 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. 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.

In terms of building the capacity and capabilities to grow, we have been continuing our systematic investments in increasing our capacity to produce more products to meet the demand in the market, make our product portfolio even more exciting and differentiated. We have upgraded also our group IT system to support continued growth. I'm also happy to report that in the annual employee survey, which we also conducted during quarter 4, in addition to the customer satisfaction survey, we saw great results in the employee responses, and that confirms that Harvia is a great place to work.

Then just one of the highlights of the fourth quarter related to innovation and our portfolio. This is a completely new category, never seen in the sauna market before. This is a smart sauna sensor. It includes 3 precision sensors: one, temperature; second, humidity, and also there's movement detection. Basically, it can sense human presence in sauna. It's connected via WiFi to Harvia Cloud. In the Harvia Cloud, there's application programmers interface. Harvia can innovate, but also external partners can innovate on the sensors data that it can provide. 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. Most likely reason is that you need to replace your sauna stones.

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. Then the commercial operator can go and check that everything is okay with the sauna. What is really cool about this is that it works in any sauna. 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. Really, really cool new innovation showcasing our ability to innovate in the digital space.

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. Our financial statements for '25 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 reports, too. The full-year figures are final and then the KPIs and different other measures, they have been collected by the management, financial management.

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. The relative profitability improved compared to last year's Q4 substantially. We have been doing their good things to improve the profitability. Unfortunately, we didn't quite reach the financial 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.

Here we see once more the comparison of the key figures for the full-year and for the quarter. Here, we see that actually, the adjusted EBIT, for instance, was improving clearly during Q4, it reached almost an average level of 25%. The investments, they have been now quite heavy for this year. 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 our production places, and we have also a few markable ESG-related investments, which we have done. This was a good year and also a 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 built goods in the stock, especially in Finland in the heater manufacturing, but also in sauna manufacturing in U.S. Then we sell them out typically during the Q4 campaigns, and that was really the case also in '25. This time, we had just a bit higher investments and certain projects, which were expensed. That's 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. We have actually quite much space there, for instance, to take more financing if we happen to make acquisition or so. 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 cash equivalents, EUR 45 million on our accounts.

The financing costs, they were quite much based on different valuation of the swap agreements and also the currency rates. Here, we see the 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 development, we have a 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. This U.S. expansion still will continue beginning of this year for a while. Yes, 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 an annual level, profitability over 20% adjusted operating profit margin and leverage, as said, under 2.5 on a long term. The dividend policy has been to pay the dividends regularly increasing dividends in 2 installments during the year. This will be the Harvia's Board of Directors proposal for the Annual General Meeting on the 15th of April to pay EUR 0.77 dividends for the result of EUR 0.25. Last year, we paid EUR 0.75.

Now it's time for questions-and-answers. I have here quite many interesting questions already, and let's start.

Well, first financial question. Harvia 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 against the -- actively against the interest rate fluctuations. 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. It's also a cost factor. We adapt, as you see our pricing also in terms of dollars, we have now been able to improve the dollar-based profitability in U.S., through price increases. 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 the segment other was related to the timing effects? Will these deliveries take place in Q1 '26?

I think it's related to APAC, EMEA.

Segment or geographical segment of APAC 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. I mentioned during my presentation, in fact, in the subregion, Middle East, we reported actually internally a 60% decline year-on-year. That is the reason why I referred to timing of deliveries as a key reason for the slow growth that you see for the APAC 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 healthy double-digit rate also during the fourth quarter of '25.

How do you operate? How do you see marketing spend in 2026 versus 2025?

I see that marketing is really playing a significant role in our business. It's a branded consumer goods business, mainly it's consumer wellness business in another perspective. In that business, power of brands and power of marketing are important.

In terms of the cost of marketing or spend for marketing, I don't expect that in terms of marketing spend per revenue, we would see significant changes as we go into next year, but we're really thinking of how can we do marketing effectively in an interesting inspiring way that captures the attention of the audience and could even go viral. This is more like the preferred way we would to see for Harvia this year and going forward.

What do you consider are the main variables with the biggest swing risks, positive or negative for 2026? Here are the examples mentioned, volume, mix, price, input costs, ForEx?

Well, all of those are, of course, relevant. If we think about what we have been seeing in the reported figures, I think the most important thing is that is the demand towards our category, sauna and sauna wellness going to stay robust also going forward and also increasing. We have all the reasons to believe that, yes, it will.

If we look at the full-year performance of Harvia a 13.5% growth in euro terms and 16% in comparable currencies, I think it's a good result given that the macro environment, as I mentioned in the beginning of our presentation, was challenging. A lot of confusion, in particular in the beginning of the year with tariffs, currency depreciation, lower consumer confidence. Despite all of that, we delivered the numbers that we delivered. I think that should be a comforting signal that there is strong longevity and the macro trends that support the growth of this business also come through even during the more difficult macroeconomic year as we saw in '25.

Demand, of course, is one key thing, but in addition to that, we have to recognize that the world has become a more volatile place when it comes to the tariff regimes, the currencies, etc. That means that also as a company, we need to adjust and make sure that we are agile and can react as quickly as it's needed for those changes. During the year '25, I think it was quite difficult to fully compensate increase in the cost of doing business, for example, due to the tariffs or currencies because there were so quick changes in such a short period of time, and that did have a bit of an impact on our reported full-year figures. I hope that the environment is a bit more stable, but I also I'm confident that our ability to react and manage even in a more real-time manner is improved for the year '26.

We more or less almost answered already this one question, but I ask it once more if you have something to add. Timing of deliveries in APAC and EMEA, is it right to assume that this phasing was between Q4 and Q1, do you have anything to add to that?

It's mainly related to literally project timings in the Middle East subregion. That is clearly the driving reason. Overall, as I said, APAC was the fastest-growing region for us. In '24, it grew by 50% in euro terms. In '25, it grew by 25% in euro terms. I think you should put things in context that it is 1 quarter with extremely strong baseline. As you can see, baseline, we had increased growth of 94% in the fourth quarter of '24. That then you should be putting the numbers that you see now reported in that more long-term perspective. One important factor, which I already shared a couple of times is that the big markets, China, Japan continue to perform really well.

Is M&A back on the table for '26. How are the valuation levels looking like at the moment?

It's a great question. Harvia is in a very interesting position. We are in a growing market, which continues to be quite underdeveloped in terms of the structure of the competitive landscape. Several, rather small regional local players. Harvia, I think, has the right to play and right to win as a consolidator of this industry.

Now, we didn't do acquisitions during the year '25. The main reason for that was twofold. On one hand, we closed an acquisition of steam company ThermaSol in the United States in the second half of '24, and we wanted to make sure that we integrate that properly. We get the synergies in terms of top line and cost efficiencies as we planned. At the same time, the company management was very busy managing the volatility, as said, tariffs, the currencies impacting our biggest region, North America.

I think in combination, the fact that we had completed a reasonable sized acquisition in the second half of '24-plus, year '25 was a very busy year for management that had an impact. At the same time, of course, we are disciplined in the M&A. We want to make sure that it's value accretive. We are continuously in discussions. I hope that in not so distant future, we would have something to report also on this front.

The dividend raise was quite lower than expected. For instance, expected EUR 0.85. Are you being cautious with the dividend growth at the moment because of the possible ramification of tariffs? Or will this slower dividend growth -- or will this lower dividend growth become the norm?

Maybe I can take that. Basically, we have, first of all, a dividend policy that we want to pay increasing dividends. We have now a very, very good track record of growing dividends since we have been public since 2018. There has been a rather steady pace for us to increase our dividends with the exception of '25.

In '25, we paid -- we increased the dividends more than we have done in the past for the reason that we wanted to deliver at EUR 0.75 to celebrate our 75th anniversary. Now this increase from EUR 0.75 to EUR 0.77, we return to the, I would say, systematic path that we have been on for a longer period of time. We hope to continue increase dividends also for many years to come. Now, this is one of the reasons. There was this extraordinary added dividend in a sense in '25.

The second is that we want to reserve firepower as the market is growing, and we have plenty of opportunities. We are increasing organically our capacity to grow. We are enhancing the competitiveness and differentiation and excitement in our portfolio, but also, we are reserving firepower for the consolidation game. It's a combination of many factors, why then the Board of Directors decided to propose this EUR 0.77 for the Annual General Meeting.

Then there is a question about the breakdown of the CapEx. It was directed more to me.

We don't publish so exactly the breakdown of the CapEx, but there is a question about tangible versus intangible CapEx. We can say that it's almost half and half. We have been substantially really investing in intangible things like this digital, what you see on the screen, that's just beginning of the area. At the same time, we really invest also in intangible, like buildings and machinery and so forth. As said, we don't disclose it so exactly.

The goal is we allow capacity to grow and improve the scalability of the business. This is basically what we are driving with the investments. For example, one of the key areas for investment has been modernizing and simplifying our IT landscape. We have grown through acquisitions in the past years where different units had different IT systems, legacy systems, some of them are very old ones. Now we have taken significant steps to modernize and have the IT capability to grow as we have been also making other investments such as investments in physical ability, facilities, plus machinery to keep growing.

Then the question is indicating a signal about our dividend policy. He or she has looked back to our dividend history, and there is a note that small dividend increases indicate that there is something cooking on the M&A front, a bit similar to 2019, when you raised the dividend by EUR 0.01 and then announced the EOS acquisition. It's not necessarily a direct signal.

Yes. I would say that it's a bit like in the old times, there were the [Crumlin] analysts trying to find meanings between the lines. It's pretty much, I guess, what it is when looking at the dividends that we cannot, of course, comment specifically on potential M&As in the pipeline, but it is clear that we are interested in it. As I said, hopefully, not in too distant future, we could also report some practical outcomes also in this sense.

Then lengthy comment with the question. Several large foreign investors told me that they would consider adding Harvia to their portfolio if there would be a flexible mix of growing dividends and paybacks. There have been some paybacks in Harvia stock to service the long-term incentive program, but I'm talking about net reduction of the total share count. In the U.S., strong consumer companies with steady growth and high cash flow returns have created a lot of tax-free value for shareholders by repurchasing stock. What's your view on this considering the strong balance sheet and flexible investment policy?

It's probably a matter of our Board of Directors, and we don't want to predict these discussions. We have noted that there is also the possibility of purchasing back shares. We now don't announce currently any program for that. Or would you like to?

No, I think that's it. Of course, it's very -- it's clear that in any company's owner base, there are different interest and some of them are more focused on the share price growth and some are more dividend focused. I think in Harvia's case, probably the best way for us to create long-term value is that we deliver significant profitable growth in the coming years that then will turn into shareholder value. That's the perspective, I believe that the Board has when looking at this.

Reflection on the gross margin and OpEx. Now the question is relating to our products. You are still priced well below your competitors in many categories. Would you increase the pricing to then also invest more aggressively in marketing and other OpEx? In other words, there is a possibility to strengthen your strategic P&L investments by adjusting the prices.

That is correct. I think there are different means that we want to use in a balanced way. One, of course, is that we have operational leverage, so scalability in our business, which we continue to improve, for example, through the investments that we made during the year. Then the volume growth will turn into stronger bottom line and in terms of absolute profit, but also in relative profit.

The other thing, of course, is that we can push our gross margin through price increases, which we have been actually doing during '25, in particular, as a reaction to the currencies and the tariffs. The good news is, which you also pointed out in the question, we are practically in any category, Harvia is the best choice. You get the best product, best solution for the money you spend. That also has been one of the key formulas for success of Harvia, the reasons why we have become the market leader. We want to keep that going that Harvia is a premium brand, world-leading brand, but also provides great value for our customers. We, of course, look at this in a balanced way because we know that we need the margin to be able to keep investing in making the company stronger and introducing even more exciting innovations to the market.

Early Q3, you are launching the high-end sauna rooms via ThermaSol. How should we think about the future sales impact scaling implied margins, sauna rooms typically have lower margins is written here, total addressable market required CapEx. Is it an option to expand with the high-end sauna rooms into Europe as well, making you a direct competitor of glass?

Well, the main reason for us to introduce a higher end, I would say, premium range of sauna rooms in the United States is really to tap into new price categories and help expand the size of the market. In a sense, the way we look at the United States, we see a market with significant growth potential. We believe that there is a great opportunity and plausible opportunity for more than 10 million saunas to be built or purchased in the United States in the coming years.

Now, in terms of the market value, it, of course, then matters that what's the price point of those new saunas. Our stronghold in the United States has been in what I would call rather entry price point saunas. Almost Haven is the brand, which you could consider kind of like the IKEA of the saunas. Good-looking, affordable assembly of products with a strong American flavor. They are made in America in the heartlands of America in West Virginia.

Basically, 10 million new saunas multiplied by USD 5,000 or so for almost Haven saunas would imply that there would be a possibility for USD 50 billion market potential with that sort of back of the envelope calculation. If we can actually inspire the market to spend some more with great designs, create more premium categories, maybe the market is not going to be full of USD 5,000 saunas, but maybe closer to, let's say, USD 10,000 saunas. That really has been the main reason we have been introducing these products and are very interested in playing in those price points as well because we know we are a market leader.

We can actually, we don't have to only follow the market, but we can also shape the market. In terms of profitability, these products are highly profitable for us. We hope to scale that part of the business up rather quickly in the coming quarters and years.

Excluding the very tough comparison last year, on a 2-year stack basis, the underlying normal sales performance in the U.S. has actually accelerated throughout the year. Still, many analysts and investors are focused on the smallest detail in every quarterly report. Wouldn't it be more useful if Harvia is reporting quarterly performance, but instead focus on half year and full-year results?

Well, probably yes, but at least this European stock market requires that we report quite regularly, and we feel really that so we draw also our investors' attention to us. We have almost half of our investors outside Finland stock funds and so forth, we would really like to inform them on a regular basis. To create that basis, we need also the quarterly reporting. How do you see this?

Yes. I think you answered very well the reporting, but I would also to complement and thank the person asking this question, because I think you're absolutely right that Harvia is not so much about the single quarters and some of the details in them. It's about the bigger story, how big the global sauna market can grow and will Harvia be the leader of this business also in the future.

Personally, I believe we have everything it takes to play and win, and we are executing our strategy systematic and also putting the chips on the table so that's possible. Then if you look at just simply the longer-term perspective of Harvia being a public listed company since 2018, basically, we went to the stock exchange first year revenue, EUR 62 million. Now we're very close to EUR 200 million. We talk about compounded annual growth rates of around 18% for the full period. If we look at just the year '25, it was in comparable currency, 16% growth, majority -- clear majority organic. I think there is a clear threat and mega trend looking at Harvia's performance.

Also, we have maintained strong profitability also during year '25, maybe not quite to the level which we, in the end, hoped to develop for the full-year, but it's not too bad. We have been managing a highly volatile environment impacting the heart of Harvia's business, North America in terms of tariffs and currencies and at the same time, brought great innovation to the market, developed our channels, develop our capacity and scalability of the business. All in all, I would definitely support your view that it's important to put things in perspective and in the bigger picture when assessing Harvia and Harvia's future value creation potential.

Back to M&A. On the M&A front, what's on the wish list, a local or worldwide player in infrared, for example? Or do you believe you have got the organic capabilities for that?

We have been quite open in the previous communication that one of the prime candidates, of course, for us is infrared sauna business in the United States. United States is the most important single country for the sauna wellness business and infrared saunas play a significant part there. We would be quite interested in finding a suitable inorganic opportunity to accelerate when the deal is right and clearly value accretive and we can really see it, this is the way it would work. That's one opportunity.

At the same time, we are looking at other significant sized markets with clear potential, both in Asia and also some of the fastest-growing big countries in Europe and looking at categories such as cold wellness, digital wellness capabilities that could provide even more benefits for those who seek for, for example, health benefits when using sauna, for example, digital sauna wellness protocols that are customized for person's health and personal needs. There are many, many different opportunities and directions that we are looking at. There are things cooking behind the curtain, but whether and when they will realize into announcements that we can make, I cannot really comment further.

Did you open new distributor doors in the U.S. in 2025? What is the plan for 2026?

In U.S., we have, I would say, 3 main channels. One is, what we call the big box retail, so that's kind of mass merchants. The second is specialty dealers specializing in wellness products such as sauna, pool and spa and then our own D2C. That landscape has been pretty steady with the exception that we actually opened Amazon as, I would say, shop-in-shop during 2025.

At the same time, we are working diligently with our commercial teams. We want to grow each of these key channel pillars that we have. We want even bigger key accounts in the big box retail, and we want more of them. We want to expand further our reach in the regional specialty dealership for wellness products. We see significant growth opportunity for our own D2C in the U.S., and we continue to develop all of those during this year.

Yes, follow-up question more or less to U.S. How do you see the underlying demand in the U.S.? Has the trends seen in Q4 continued in January and early February?

Well, we don't comment the current quarter. All in all, I said, the year, despite all the noise in the macro environment, consumer confidence, etc., we delivered 26% growth for the full-year in the United States. Clear majority of that organic growth. I think it really tells a story that sauna is a strong trend that even defies the environment outside the sauna market. I think that I have all reasons to believe that, that is going to continue also this year.

Can you discuss the outlook for operating margin for the next 2 to 3 years? Can you generate operating leverage or likely to stay close to 20% given reinvestment and ForEx headwinds?

Well, it also decision by management, how do we steer the business. If you look at the, for example, fourth quarter on the full-year '25, it is clear that we have increased the OpEx levels. That relates to, for example, marketing, channel development, R&D, etc. Why we are doing it because we are seeing such a big growth opportunity for years to come in this market, and we want to have the absolute best portfolio to play and the best channels to play. We made the choice. Of course, we could have made the choice that we not invest as much in marketing, not as much in product development. I think it would not be maximizing the value potential of Harvia in the longer term.

The way I think is that still in a couple of years, we are in this phase where there are significant needs and opportunities for us to make Harvia stronger, while those actions do require also us to spend some money, so put chips on the table for payback over time. At the same time, we try to manage also that the results even on a quarterly basis would provide evidence to the market that we are on the right track. It is clear that management wants to avoid dips in the EBIT. At the same time, if EBIT margin would be significantly higher way beyond 20-plus, then we might not be investing enough to make the future happen and make sure that Harvia is by far the most competitive player in the market.

Ultimately, it's very much about the management decisions we make. This is the way I see Harvia in the big picture. We see clear operational leverage. When we have the volumes and volumes come through, it is really in our high gross margin business having a very positive impact on the bottom line. Now, assuming that my vision of Harvia, which is that Harvia will be much bigger in the future than we are today, I think it should have a positive impact through operational leverage, so scalability of the business also in the bottom line in the years to come.

Could you please explain the spike of CapEx in '25? What should be expected in '26 and beyond, please?

I can take this. I calculated that the CapEx now for '26 was about 7.5% of the total net revenues. In '24, it was 3.5%. We haven't really put this as an official financial long-term target, but a good estimate could be somewhere lower than what we had in '25, but higher than what we had in '24, so somewhere in between. We will have some substantial investments still in '26 and time after that. We want to invest for the growth.

What was the organic growth in the U.S. in Q4?

We don't disclose really the single countries, even if North America is really the biggest part is U.S. As you see, we had in euro terms, 2.8% in the spreadsheets there in the report. Since the dollar depreciated about 8%. It should be somewhere about 12%, 13% during Q4, including Canada.

Yes. Just to comment that we didn't have any inorganic moves that would have impacted. All of that growth in North America was organic because ThermaSol has been consolidated in our P&L since August '24. All you can see for North America is organic.

That's right. Yes. How much did the mismatch in deliveries in North America affect the quarter, so mismatch of deliveries. What would growth have been in those orders, if they would be included in Q4? How will this affect Q1 in '26 in North America?

Well, we didn't have a number that we would have published for the overflow from quarter 4 to quarter 1 in North America. What I can say that the campaigns went really well, and there will be deliveries happening in quarter 1 based on significant and great order intake during quarter 4. From that angle, it does look positive.

What kind of sales growth did ThermaSol deliver in financial year '25?

Well, we haven't disclosed that fully, but we are pleased with ThermaSol. It's providing us a solid base to grow our position in the steam. It's also an avenue for us to drive our higher-end offering beyond steam since ThermaSol's channel mainly relate to high-end home spas and commercial spas. The integration is working as planned. The profitability impact is coming through. Of course, in ThermaSol's case, the dollar depreciation has been a bit of a topic. When it comes to, for example, the steam numbers that we reported for quarter 4, there is a significant portion that is coming from that Middle East project business. ThermaSol,'s good.

Yes. A follow-up question from another person. Can you provide some color on development of ThermaSol? We did it. Has it developed as expected? I think yes. What type of synergies have you seen so far? Are there more synergies yet to come?

There are both top line and cost synergies. Top line relates to especially the cross-selling between the channels that ThermaSol has and channels that we had before ThermaSol, which are complementary. We want to sell more of premium products from Harvia Group side through ThermaSol high-end channels, and we want to bring ThermaSol's steam expertise through our kind of, I would say, legacy or previously -- the channels we already previously had in Harvia in the United States.

Mostly, we've been focusing on the cross-selling in the United States so far, but we will be also using ThermaSol to enhance our steam game beyond United States in places like Europe, Middle East and Asia, so that's top line.

Then the cost synergies relate to things, like Harvia is a significantly bigger player than ThermaSol. When we look at, for example, procurement, so simply component prices that Harvia is getting and what Thermool used to get, there is a significant difference. We have been able to lower the cost of components sourced for ThermaSol even quite significantly.

First, we had to burn through the existing component inventory that ThermaSol had at the time of acquisition, plus it took some time for us to find those alternative suppliers, do the appropriate testing, make sure that everything is fine for us to take those new cheaper components in use through Harvia's own sourcing, but it's really -- it's happening as we speak, and the impact has already started to come through. Not to the full effect yet.

When does Harvia start the cooperation with Ronaldo?

Well, we are very thankful for Ronaldo and actually many other, I would say, mega celebrities in the world. Actually, sauna category is pretty interesting that people really love to talk about it. It's something that really sparks people's interest and emotion. On one hand, it's great for our health. On the other hand, it's great relaxing, pleasant experience, but it's also something that I think is very much into the core of humanity, connecting our body, mind and spirit. It's very physical experience, but also the physical reaction and our body reaction to the heat really helps to calm our minds, etc. People really love sauna.

That's why I believe we see so much, for example, social media postings, not just from the mega influencers, like Ronaldo and others elite athletes, but also in entertainment superstars, but also ordinary people. We haven't paid anything really to the sort of mega stars. They would also come probably with a pretty high price tag. We have been estimating for fun at times that how much of free market making they are making for us, and it probably would be counted in tens of millions, if not even 100-plus million over multiple years, the value of posts that people, like Cristiano Ronaldo and likes have done for sauna. Then we think as the global leader of the sauna movement and sauna business, we probably are the company benefit most of this activity in social media, so we are very thankful for that.

What's the opportunity of team-up with other wellness players, such as [indiscernible], all others?

Great question. Something that ease my mind. We're being about sauna provider in significant wellness benefits, we would like to see a future where those who are interest wouldn't just feel, have that feel, good feeling, relaxing feeling, more calm mind, etc., but also for those interested, we could also provide the data what's happening in the bodies through the sauna wellness programs and routines that they go through. That would obviously a key part of that would be sensoring what happens in our bodies. There are many players, like the ones you mentioned that are on our radar screen in terms of potential partners in the future.

Now, we have been in this session already over 1 hour. Now the last question. Thank you very much, by the way, for all the great questions.

Could you elaborate what is the value of the brand? Considering the actual product from technology, it's not complicated to manufacture. Are there small barriers to entry to the business?

Yes. I think the brand a significant part of Harvia and Harvia's success, and I think it's going to get even more important in the future. Why I'm saying that? If you think about what's happening in the market, Harvia has become and emerged as the leader of what used to be a niche business that was mainly known by just the industry insiders. In most countries, if you would just go and ask a consumer on the road, hey, name me one sauna brand, they would answer that I don't know any.

This is changing, because sauna is becoming much more of a volume category or maybe even a mainstream category. In such an environment, the power of brands become stronger and more important. I have a dream that Harvia could be a brand, like to Google is ply a synonym for Internet search or Tesla became the icon for electric cars that Harvia would be the icon of sauna and basically the thought that it would invoke is Harvia, global leader of sauna and sauna feels better with Harvia. Maybe that's a good ending.

Okay. Thank you very much for everybody, and thank you for following. Let's sauna.

Thank you very much. Take care. Let's sauna.

Hello, everyone, and welcome to Harvia's Third Quarter '25 Earnings Webcast. My name is Matias Jarnefelt. I am the CEO of the company. And with me, I have Ari Vesterinen, our Chief Financial Officer.

Hello.

I will first start by taking you through the highlights of quarter 3 in terms of business and financial performance, and I will also talk a bit about our strategy implementation. After that, Ari will continue and will shed more detail on our financial performance and numbers, after which we are very happy to get your questions.

So let's start and summarize quarter 3. This time, it actually is very easy. We can summarize even with just one number, 19. So 19% top line growth at 19% adjusted EBIT margin. So essentially, when we talk about the top line, we delivered EUR 46 million, and that's, I said, 19% growth versus the comparison period. In terms of comparable exchange rates, that's 22% growth from last year. Organic growth was solid double-digit at 16%.

We're very pleased that the growth was broad-based. Essentially, we had double-digit growth across all of our 4 geographical sales regions. And this despite the fact that, of course, this year has been rather volatile in terms of the macro environment. We had modest quarter 2 in North America. Now returning to a solid double-digit growth. That's, of course, something we are very pleased with. APAC and MEA continued very strong double-digit growth. And we're also very happy that Europe that has been a bit on the slower momentum for now the past couple of years, returned to double-digit growth as well.

Our adjusted operating profit was EUR 8.8 million, and that represents 19% of our revenue. And that's an improvement from quarter 2 when we had 17% margin, while it's still slightly below our long-term target. The operating profit margin was impacted by the gross margin and in particular, higher cost of goods sold due to tariffs and currency exchange rates. This specifically refers to our heating equipment business, where we make the products mainly in Europe. And then when we sell them in the United States, they are sold in USDs. And of course, the increased tariffs also apply.

Also, we've been increasing our operating expenses as we continue to build the foundation for long-term success in areas such as product development, brand building, channel expansion and operational efficiency. If you think about the year-to-date performance, it could be summarized at 17/20. So 17% top line growth at 20% operating profit margin. And looking ahead, we remain focused on executing our strategy and building the foundation for long-term success. And at the same time, we are focused on also delivering strong results in the short-term.

In the near-term, our key focus areas include commercial excellence that includes topics like driving growth and driving pricing in this volatile environment, also sourcing and operational excellence to manage the materials cost and also prudent OpEx management. But it is very clear. This is extremely attractive market that's supported by strong long-term growth drivers, and Harvia is extremely well positioned to continue to lead this market and deliver significant growth.

Here are the key figures for quarter 3. So revenue at EUR 46 million, and that's 19% growth, organic 16% and at comparable exchange rates, that's 22%. Adjusted operating profit margin at EUR 8.8 million, and that's 19% of our revenue. Operating free cash flow in this quarter was minus EUR 600,000. And there's 2 reasons to this. One is that historically, quarter 3 is our lowest cash-generating quarter. And the reason for that is that during the quarter 3, we are building products to sell during the high winter selling season.

Also, we do believe in the long-term growth and success of Harvia. And that's why we're also investing in the platform to grow. So we've been making quite significant investments compared to our investment history in improving our operational efficiency and also building capacity to grow. So last year, we grew -- last year, we bought land around our West Virginia factory in the United States, and we have started to develop the site. And that's just one example of what is going on in our business. In terms of the first 9 months of the year, revenue at EUR 145 million, and that's 16% growth versus last year and organic growth at solid double-digit 11%. Growth at comparable exchange rate at 18%. Adjusted operating profit very close to that 20% mark at 19.7% and operating free cash flow for the first 9 months, positive EUR 13 million.

As I opened, I mentioned that we are really pleased that we delivered strong broad-based growth during this quarter. So all of the regions grew double-digit. The highest growth rates continue to be outside Europe and also in terms of absolute contribution, North America and APAC contributed the most. But as I said, we are very pleased that now we also saw Europe playing strong and delivering double-digit growth in both of the European sales regions.

When we look at Northern Europe, the region grew by 15%, and that's a significant momentum change after tough 3 years. And during quarter 3, North Europe represented 24% of our total revenue. Where did this momentum come from? We had strong performance in Sweden, in particular. And there, that momentum has been built through channel expansion and development. And also, I personally believe that, here there is some impact from the excitement that KAJ and Eurovision created around sauna in Scandinavia during first half of the year, and now we see that realizing in our numbers. Also Baltic countries delivered strong growth.

I'm also very pleased that Finland that has been also struggling already it's quite some time, actually turned back to growth. And here, our focus is to continue on a positive path and really build foundations for sustainable, steady growth for the years to come. Continental Europe grew by 10%, and that's on top of 8% growth a year ago in the comparison period. And I think that tells a story about continued solid progress in the market. So essentially not just a temporary swing, but there is now already a longer trend where we see Continental Europe strengthening.

If we look at Continental European markets, submarkets, we have many very strong performance countries there. For example, United Kingdom, Spain, countries in Eastern Europe like Poland. North America returned to double-digit growth after the modest quarter 2. And essentially, our revenue grew by 24% and the region represents now 36% of our total revenue. If you look at the comparison period and exchange rates, the dollar is now around 6% weaker than a year ago. So give and take at constant currencies, North America would have grown around 30%.

In terms of organic growth and organic growth in North America, I'd like to note that ThermaSol, a company we acquired in the summer of '24, has been fully consolidated in our numbers since August '24. So essentially, it contributes to inorganic growth for Harvia Group only for the month of July. So August and September this year are already part of our organic growth. And majority of our revenue growth in North America clearly came from organic development.

I'd also like to highlight a piece of news that came after quarter 3 was closed, and that is that we have appointed new President of Harvia North America and Region Head, Nathan Hagemeyer. We had a thorough process to find the best possible person to take the lead of this crucially important region for us. And Nathan brings a wealth of experience in selling technical products to residential and commercial facilities in a multichannel sales environment that resembles largely the sales setup that we have in Harvia in U.S. And also, I think there's a strong culture fit, something that we also value a lot. And I'm extremely pleased that Nathan accepted our offer and has already started actually since Monday this week in his new role.

APAC and Middle East and Africa is continuing on its strong growth path. And you can see here the comparison figures from '22 through '25. This region is really picking up momentum. And also in terms of just absolute size, representing now 12% of our total revenue, it is a significant part of our business. And what we're also very pleased with is that APAC, when it was smaller, it was more volatile and prone to, for example, individual product deliveries. But when we look at the numbers now, the growth is broad-based, and we feel that the growth is on a strong platform in APAC and Middle East.

Now looking at the portfolio view, we continue strong performance in our core of technical equipment for sauna and spa. And you can see that the heating equipment represented 56% of our top line during the quarter 3. We also are having strong momentum in other areas, but heating equipment just grew so fast that the relative shares of some of the other parts of our portfolio didn't develop.

Now if we look at the growth bridge for quarter 3 by product category, you can see that the biggest absolute contribution, nearly EUR 5 million came from heating equipment, and that's 23% growth, but also solid double-digit growth in many other parts of our portfolio, and this is also something we are very pleased about.

Now then let's talk a little bit about our strategy. Harvia is playing in a very interesting market. We are world leader in a market that has strong growth drivers that we believe have sustainability over a long time. And we want to be a proactive leader and leader that shapes the market and excites the market. And our strategy is based on 4 focus pillars that respond to questions what, where to whom and how. So what delivering the full sauna experience about product leadership and portfolio leadership. Where it's about winning the right markets that matter the most, to whom it's having the leading channels and brands in this business and how it relates to our operational excellence and competencies and people.

And I'd like to mention a few things how we've been executing our strategy during quarter 3. In terms of delivering the full sauna experience of product and portfolio leadership, I'm very pleased that we have a strong core, and strong core helps us to build also the future. So when you look at the heating equipment performance, you could see that it is really going from strength to strength. At the same time, we are clearly upping the game in terms of innovation and differentiation. And in the following slides, I will share some of the examples of new products that we brought to the market or launched.

In terms of winning in the markets that matter the most, North America, of course, we are very pleased that it's back on strong growth trajectory. And looking at the first 9 months, North America is really performing very strong. Also, APAC is performing extremely strong, and we are continuing systematic activities to drive growth across key markets and making sure that we are not too dependent on any single market in that region. I'm also very pleased that in terms of Europe, the tenacious and systematic work that we've been putting in place over the last couple of years is really starting to bear fruit. So having both regions now in double-digit growth is something that does help us in our strategic and growth journey a lot.

In terms of leading the key channels, we, at the same time, want to deepen and grow our partnerships with the existing and traditional customers, that's mass volume merchants and also dealer channel. We want to be the best partner. At the same time, we want to build an even stronger direct-to-consumer channel, and I would encourage you to go and visit our almostheaven.com site and thermasol.com site. So you'll see the level of excellence that we've been able to build during the past 12 months on our direct-to-consumer channels.

In terms of best-in-class operations and great people, we are continuing to invest in the heart of our competitive advantage, which is operational excellence. So we've been investing, for example, in energy-efficient and new coating system for Dierdorf that provides cost benefits and also efficiencies. We are investing in our Lewisburg site in West Virginia, in particular in anticipation of driving a significant and ambitious growth strategy in that region. We are also investing in our group IT, so streamlining, bringing common platforms and bringing more simplified and modern platforms for us. And that's also a very important enabler for us to keep scaling this business up.

And now a few highlights from our innovation pipeline. So we have now started the sales of Harvia Fenix, which is a new full touch control unit for volume segment. I think it's really the leading product in this category. Exiting 4.3-inch full touch screen product. It's very easy to use with, for example, ready-made presets like mild, cozy and hot. It's smart. So actually it learns about your sauna. So it knows how fast the sauna heats up. So instead of programming it your heater to start heating, for example, 30 minutes before you want to go to sauna. Actually, sauna knows how long it takes to heat up your sauna. So you can just easily put that I want to go to sauna at 3 p.m. and the sauna will be ready, making it very easy for you and also saving energy.

What's really cool about it, it's Wi-Fi enabled, and it's over-the-air updatable, so we can keep updating the software and providing even more functionality over the life cycle of the product. And in addition to being able to sell it with new heaters, we can actually sell it to significant installed base of saunas already out there since it's backwards compatible with huge seller Harvia Xenio control panel. So a really exciting product that we are very happy about.

Another example is our new MyHarvia smartphone app and definitely the most advanced sauna app there. It very nicely aligns the user experience with Harvia Fenix. It's modern, consistent. Again, a lot of features, functionality to help you get most out of your sauna, including over-the-air updates, and for commercial users, ability to control multiple saunas from the same app and interface. We've also been working on the Harvia cloud platform in the background. So really making us ready for the future.

Now in the United States, we've been playing mostly when we talk about ready-made saunas in the more like entry level through Almost Heaven Saunas in price points from $5,000 to $10,000. And with ThermaSol brand, we are now attacking the high end much more aggressively in the past. So we've introduced a range of really exciting 3 new models for the premium sauna category in price points from $30,000 to $35,000. And the response to this introduction has been very, very strong. So very much looking forward to what we can do in terms of delivering results in the coming quarters and years with this strength and play in the high end.

And one highlight is that we actually got a prestigious recognition as Time Magazine selected Harvia Group solar powered sauna as one of the best inventions in 2025. And this is quite unique product. So it's basically electric heater powered product but designed so that it actually can be very efficiently and conveniently run with solar power. So really providing full freedom from electrical grids and very sustainable solution. Again, a highlight of what Harvia can do.

And then the final slide before handing over to Ari. This is just an example of how we also continue to build other group brands like EOS, our high-end brand for technical equipment. Aufguss World Championships were held end of the summer in Italy. And in the center of the picture, you can see an example of what kind of products we can deliver. So that's an EOS event heater. And that was really exciting to see us as the centerpiece of such an event. Maybe another event to mention, Osaka World Expo was running 6 months during this year with over 20 million visitors. And essentially, Harvia was part of sauna experience site there, which run for 6 months, and it was fully booked 7 days a week, full day for 6 months, really shows the power of sauna and what we can do to excite the market.

So with that, I would hand over to Ari.

Okay. Thank you. So when we now compare the quarters, actually, the quarter 3 was great. We had a very clear growth path and the profitability level in absolute money stayed basically on the same level as a year ago, but the percentage is lower.

And one thing what is here important to note, almost all financial metrics in the profit and loss statement improved in Q3, except the use of materials and external services. And this measure is not always the same from quarter-to-quarter. It depends on the promotions and product mix and so forth. And frankly speaking, we had a very good year last year. We had that percentage only about 30%. And now we had 37% of the annual -- the quarterly revenues, but this 37% is actually very close to our average, which has been in the past about 35% of the total sales. So I'm personally not worried about this percentage at all. It just requires certain price management with which we have been working. And as said, the quarters are not always alike.

Here, we see the most important financials, the key figures for the review period. Okay, we have already seen the profitability and growth rates, but probably some highlights to note. The earnings per share increased about 12% now. The operating free cash flow, okay, it is now lower than a year ago, and it's because of the growth investments we have also in net working capital and in CapEx. And that's visible on the line investments in tangible and intangible assets. This year is an exceptionally high investment year. We are investing for the growth.

Net debt stayed more or less on the same level as a year ago and leverage also net working capital has been growing. Also, our number of employees has grown, but only about 8% when we have grown 19% in the sales. So the effectiveness of the staff and the organization has improved. Here, we see the operating free cash flow and cash conversion over the quarters.

And what is very typical for Harvia is the seasonality. We have the lowest cash flow usually in Q3 and then the highest usually in Q4. So that has been at least the pattern in the past. And the reason is simply that we have been making products to our stock during Q3 and the biggest sales seasons in North America, in Central Europe and many other areas. The biggest sales seasons are actually in Q4 and Q1. So we are well prepared for the Q4 sales season, and that's demanding some investments in advance.

The leverage has been staying on a rather low level, 1.4 at the end of Q2. And in our long-term financial targets, we would like to stay under the level of 2.5. But in the case of acquisition also, we could temporarily also exceed it. But as you see, we have a very healthy balance sheet situation in terms of debt.

The net financial items, no big changes now there. We had quite steady environment now during Q3 with U.S. dollar and also the interest and interest rate swaps, they helped also to keep the interest rates quite steady. So actually, the effective interest rates of interest costs -- financial costs to be paid out followed very much the accrued balance sheet-related costs.

Here, we see how the investment levels have increased during Q3. And I'm personally not expecting as high level for Q4 anymore, but this year at '25 is somewhat over the historical average level of investments. And the investments, they are really, really required, and they have a quite short payback time, and they improve our operational efficiency also in the near-term.

Okay. The Harvia's long-term financial targets, just to repeat, they haven't changed anywhere. They have been quite a while on the same level since last Capital Markets Day 2 years ago, 1.5 years. The average annual growth rate over 10% profitability, adjusted operating profit margin over 20% and leverage, as mentioned already earlier, under 2.5%. Harvia pays twice a year dividend, and now the second dividend installment was paid out October 28 this fall.

So now there is time for questions, please.

I have actually got a few questions here in the tablet and most of them are business related, also some finance questions. So I start to make -- ask 2 questions from Matias first.

Is there an effect of prebuying ahead of announced price increases in your strong U.S. sales growth in Q3?

Maybe I would take you back to 3 months ago when we talked about our quarter 2. And I understand the quarter 2 results were a bit of a disappointment to the market, in particular, what comes to the modest performance of North America during that quarter. But at that time, what I told you, I said that look at quarter 1 and quarter 2 in combination because there were clear kind of shifts between quarter 1 and quarter 2, in particular in the comparison period from '24.

And when we look at the performance in North America now quarter 3, it's actually a logical continuation of the first half. Another thing that I did mentioned during that earnings call was that we saw quarter 2 in North America modest in the earlier part of the quarter, but we saw signs of improvement as the quarter progressed. So essentially, I would say that this is a logical continuation of the performance already from a longer period of time. Maybe, however, I'd like to make a one brief comment, which is related to quarter 4 last year. And that's, of course, relevant for the baseline now in the quarter that we are now living in quarter 4 this year.

And that, of course, is that we had a very strong top line growth last year, overall 28% growth in quarter 4 last year and 63% growth coming from North America, which had a significant portion of rather low-margin campaign sales. So maybe that's something to take into account as you assess Harvia's near-term outlook. But all in all, we see strong performance, continued performance in North America despite all the noise in the market. And despite that the consumer confidence generally on a macro level, we've seen, of course, taking a hit. But what comes to interest in our category, we seem to be in a good place.

There is actually quite closer question to that. What is your strategy ahead of campaign heavy Q4 in terms of inventory levels and pricing?

Well, first of all, the plan is to participate in campaigns. Campaigns are a significant part of many of our partners' business model. So when we think about, in particular, large volume retailers, typically, they want to have something exciting to offer to their customers during the high selling season, for example, Black Friday, Cyber Monday. And we have a choice, either we participate, or we don't participate. And for us, it is clear we want to keep developing these partnerships. We want them to be a win-win for both. We feel that there's great opportunities for us. But of course, we've also reflected the outcome of quarter 4 last year and always try to learn from the past experiences.

In terms of building the inventory, that's also visible in the cash flow. It is very clear that we have been building inventory to be able to deliver and sell during quarter 4 and quarter 1. And I think it's also a sign of confidence that we in the management have for the business.

Then one question actually, you shortly mentioned it, but I ask this anyhow. Can you please tell more what is the heater behind the premium range launched under ThermaSol brand?

The ThermaSol saunas that we launched will be equipped with EOS heaters. So if you think about our premium brands, we practically have 2 of them. We have the German-based EOS that we have had in our portfolio since 2020 and ThermaSol, high-end brand for the steam and kind of home spas in North America that we acquired last year.

In U.S., ThermaSol is clearly more well-known brand versus EOS. So while ThermaSol has great channel access to high-end spas and high-end commercial facilities, we feel it's a great opportunity for us to piggyback with EOS on that. So essentially, the idea is that what comes to steam products and then the kind of full sauna solutions in North America, they are branded ThermaSol. But what comes to the heating equipment, it's powered by EOS. So ThermaSol powered by EOS.

Can you specify the investments in the efficiency you made in Q3? What segments and regions?

Well, the investments are rather broad-based. So one of the example we pointed out was the EOS factory that's located in Driedorf close to Frankfurt. We made quite significant investments there. Another example I did mention as part of my presentation, we bought land around our West Virginia factory in anticipation of building options to grow. And now we are taking action. So there is already works, the groundworks ongoing on the site, and we are expanding the facility as we continue to see significant growth opportunities for us for years to come in that region.

Then more finance-related question. What was the ForEx impact on sales level in North America? I am after the euro-USD exchange rate you used in Q3 '25.

The exchange rates we used for our P&L, they are the average rates from Bank of Finland. And for this quarter, we used exact average. It was $1.168 per euro. And a year ago, it was about $1.10. So actually, dollar was about 6% weaker than a year ago during this quarter. And as we saw from the pictures already in the presentation, we were way over 20% of the growth in Northern America. And in terms of U.S. dollar, it was about 30%.

Is EMEA growth more one-off or new projects already coming after current project deliveries?

EMEA, so is that Europe?

Yes. It is the -- well, let's consider the whole area, APAC, EMEA.

Okay. APAC and Middle East and Africa. Okay, sure. It used to be much more volatile. And of course, when the scale of the APAC, Middle East and Africa business was smaller, it was quite easily swung either direction by single large orders, for example, significant project deliveries. But over the past few years, our key goal has been to develop the region in a sense that it really provides not only growth opportunities, but also on a stable ground, so diversify the kind of outreach that we have in the region.

And when we look at the quarter 3 in terms of the markets and countries that delivered to that regional performance, it is wide spread, and that's very good thing for Harvia. So we saw significant growth in countries like Japan, China, Oceania, Australia and also strong performance in EMEA. So it's not like something really stood out and kind of made the whole thing happen. It really is broad-based growth.

And there wasn't -- there's always some project deliveries in Middle East, in particular. That is more a project-based business. But I would consider almost something that is very part of the business we do in that part of the world. And there wasn't any particular outliers in terms of, for example, project business impacting our quarter 3. So all in all, I would assess it as a solid broad-based performance.

Yes. There is really a great interest for sauna, a growing interest in wealthier Arabic countries and certainly some business to come also in future. So it was really not a one-off even in those areas. The new Fenix control and app, is that an opportunity for installed base? Does it give modernization demand?

This is exactly the thinking we have. So I think in the sweet spot of innovation, we have something that excites the market and we can sell with the new products, but at the same time, provides us an opportunity to tap into the existing Harvia installed base. And if you think about the kind of strategic rationale of how we see Harvia in the long term, it is very important for us now to be a winner as the market goes through a significant growth phase.

So have more Harvia products and saunas out there in the world. And the way we think about it is, that we want to make it easy for customers to get into the Harvia world. And once they are in the Harvia world, they want to stay. And one of the example is that if you have already Harvia sauna where you have that Xenio kind of mid-range control panel, it works perfectly with the new Fenix. There's no need to renew, for example, the wirings. That's an exciting opportunity for us to reach out to Xenio owners and basically send a message that there's an exciting innovation. Do you want to upgrade your sauna experience and modernize it with now this full touch smart console that Harvia Fenix is. So the idea is that as we basically sell products and new products, we also want to build the foundation for recurring revenue and loyalty for the long run.

Okay. Now there is a series of 3 U.S. related -- more or less U.S.-related questions. So let's start. What is your best estimate on your performance relative to competition in the U.S.? Is part of the gross margin pressure attributable to increased price competition or merely by the impact of tariffs?

So around 30% growth after 9 months in the U.S. I think it's a solid performance. The market continues to grow. I believe that we have taken share. So that's one perspective to it. On the kind of pricing competition side, I think it's more related to inertia in having price increases effective that then truly reflect the changes in the cost of doing business due to tariffs and for example, exchange rate changes that happened actually pretty rapidly. If you think about the dollar depreciation, it really started to happen actually towards the end of quarter 1, then quarter 2 was significant rapid deterioration and then more stabilizing during the quarter 3.

And then, of course, the tariff increases. We used to have tariffs of around 4% for our heaters that we make in Europe and sell in North America. And essentially, with that 15% general tariffs plus extra tariff on the steel part of the product, we talk about a little bit above 20%. So it's also quite significant impact in terms of that hardware business from Europe. We have implemented already pricing change, but it's also a little bit of a balancing act that what's the right strategy and right pace because at the same time, we want to keep growing, we want to keep our customer relationships strong. But of course, we also need the appropriate compensation for the great products that we make.

So ultimately, the sort of margin dynamics, I think it's more related to just the macro factors, the exchange rate and tariffs rather than there would have been significant intensification of competitive landscape.

Do you expect that the price increases implemented to counteract tariffs will be fully visible in Q4, thus supporting margins?

Well, long story short is that, I think, of course, price increase are always supportive. There's maybe kind of one area of uncertainty, which is basically kind of financing rules. So basically, to a degree, we've still been selling some products that were imported to the market before the tariffs took effect. And basically, it's first in, first out principle. So of course, we have been modeling also the kind of what's the full impact of the tariffs as we will transition in a situation where practically 100% of the products will be having a tariff attached to them. But all in all, I'm confident in the work that we have been doing. Significant effort has been put in pricing analytics and assessing the situation and agreeing and implementing the right course of action.

How do you aim to improve your margin performance in Q4 in the U.S. versus last year when aggressive campaigns heavily diluted your margins?

Less aggressive campaigns. Now that's maybe a little bit of a kind of a cheek -- tongue in the cheek, but there is some truth to it. That's, of course, for sure. There is many things. So generally -- general price increases that we have been implementing and they have been also coming in force step by step. So we basically built a more like a transition path. It's not yet in full effect, but it's already partially in effect. It's about also being smart in terms of what kind of campaigns and campaign pricing, not only with kind of key accounts we have, but also what do we have available in our direct-to-consumer, which is the fastest channel where our pricing decisions can basically be affecting the price the next minute.

And most likely, you would see a little bit less aggressive campaigns, but still good campaigns because at the same time, we want to continue to drive top line growth, and we want to continue to take share in this growing market to place us very strongly in terms of how do we have products out there, building the installed base and building the brand leadership for years to come.

If there is a retrofit demand, perhaps you talk about ASP for such an upgrade, average sales price.

Yes, I think that's a great comment and something that we are increasingly focused on. So while we are driving growth and volume growth and as I said, building the installed base, it is very clear that in our minds, there's also the long-term future where hopefully, there will be essentially millions of products and saunas where we can sell more continuously. In terms of kind of metrics that we would be reporting like ASPs and ASPs by product category, that's something that we haven't done so far, but the idea, of course, behind that question is a very good one.

Yes. Just to remind, in the more traditional sauna areas, 70% to 80% of our total revenues is actually replacement revenue. People are buying new saunas to their old or -- old place or replacing the heaters. And actually, our sweet spot of heater sales is the second heater for the same sauna. When the construction company has selected the cheapest heater, Harvia heater usually for the new sauna. And after a couple of years or probably 5, 6 years, the user of the sauna wants to have a better one. And that's the most interesting heater for us with more equipment and features and also with higher margins.

And maybe I could also continue on your very good answer. And just examples of the sort of building recurring business on the installed base. One example is, of course, now Fenix, where we can actually, through OTA, over-the-air updates, actually sell new features during the life cycle of the product. And then, of course, we are looking at -- basically these control panels are becoming fully connected interfaces in the wellness oasis that sauna is, what kind of, for example, digital services in the coming years we can offer that could also provide direct service revenue that would be high margin and scalable.

You discussed already earlier about that we make probably not so strong campaigns, but we make campaigns during Q4.

Now the follow-up question to that, shall we expect negative organic growth for North America for Q4?

I will leave that to your Excel exercise. We, of course, always want to see positive figures, and we have, I would say, high ambition level. And then as you know, we don't give short-term guidance. So that's something that you will need to assess.

Okay. Your CapEx has been now somewhat elevated both in '24 and '25. Is this higher CapEx expected to continue in '26? Or should it decline?

Our estimate is currently that it will decline a little compared to this '25, but we don't give more exact figures for that.

Okay. When are you able to offset the tariff impact with price increases?

That was more or less already discussed a little. By the way, the tariff impact for completely sauna cabin set in U.S. for us is actually not so heavy. So -- because the saunas are produced there in Northern America and from local wood with local work power. So only the hero, which is coming from Finland, it has max up to 20% impact tariff for the landed cost, but it makes -- from the total price of the package only about 10%, 10% to 15%. So the impact of the tariffs for the complete sauna cabin, which we are mostly selling there is only about 2% and with our pricing power, we should really be able to increase that 2% or somehow otherwise compensate. So the biggest impact of the tariffs are for importers who are importing only the heaters for their saunas and for the distribution. And we have that kind of customers also in U.S. who are actually paying the import tariffs by themselves.

And maybe to also build on what Ari said, we, of course, are in close discussions with our key customers. And some of them have also big companies, public listed companies making statements also in terms of the development on kind of the pricing of the merchandise that they buy from suppliers from the Far East. And I think it is clear that there is kind of this dynamics that the inventory that many companies have in the U.S. to a degree has been imported before the tariffs took in place. And now more and more companies are really the kind of, I would say, the back against the wall implementing the price increases.

So essentially, I would say, as my personal assessment that we have not fully yet seen the pricing increase impact of the tariffs that are currently in force and finding that new equilibrium in the market will take probably another 6 months.

From some of my personal channel checks in Europe, it seems that the winter selling season has started earlier than normal. Several distributors told me that Harvia sales have been accelerated notably throughout the summer and since October. Would you like to comment that?

Well, I can comment. Actually, I'll take you again back to 3 months ago when we were talking about quarter 2. And actually, usually, I don't talk about weather as an excuse. But actually, 3 months ago, I did mention that. And I did mentioned it in particular in relation to our Northern European performance. So in Northern Europe, we had basically vacation house sauna season, so-called cottage season is very important for us. But in North Europe, we had a very poor beginning of the, I would say, spring and beginning of the summer. And the weather was significantly better in July. And that's what I also mentioned. So I would say the quarter 3 that you now see, it's actually a little bit the dynamics from the season. Actually, the spring season started a bit later just due to the weather.

The same is true for U.S. when looking at recent momentum on Costco and Wafer. Most importantly, customers are increasingly mentioning that Harvia has been the best value for money. Thank you. Not working for us, this [ ask. ] Somehow, this feels like COVID-19 2.0 light as consumers are staying more at home. Meanwhile, we are coming out of a period of subdued home improvement, which has started to pick up again, also benefiting Harvia in mature regions. Does this match to your view?

Well, I think there's a little bit different dynamics between how much are we in wellness business and how much are we in home improvement business depending on the region. So for example, in Finland, it's very clear that sauna has close connection to the property market and new build construction just for the simple reason that saunas in such a big majority of houses, apartments and summer cartridges. So there is such a correlation.

Whereas in regions where the sauna density is much lower, clearly, the dynamics is much more about buying a wellness product. And sauna is like, I would say, miracle wellness oasis. Sauna has significant health and wellness benefits. And it's unique since you can get those health and wellness benefits in such a pleasant way. And this combination, it does great for you and it feels great, story resonates extremely well, almost no matter what the economic times are. And personally, I'm a strong believer of this sauna as a perfect wellness oasis and the strength of the story for years to come.

During the conference call in September, Costco's CEO said they would radically reshuffle their holidays offering. For the first time, they will also bring in saunas in store for which they didn't have enough space previously. Does this impact Harvia given that Costco members are now limited to shopping almost 7 saunas product online? Does it imply that Costco will carry saunas in its own inventory and thus impact Q4 and future performance?

Well, I wouldn't comment too much on the CEO of another company. But of course, we have taken a note, and we have a long-standing relationship with Costco. And the growth ambition of Harvia is to grow each of our accounts, so we want to keep developing Costco, and we see significant growth opportunities. We also want to have more of the big box retailers as part of our partnership network. We want to grow in the dealer channel where we can sell more premium products like ThermaSol saunas, which require, for example, installation support for the end user. And we see significant opportunity also in our D2C with a portfolio that's tailored for D2C so that all channels can grow without cannibalizing each other.

And of course, as I said, we know about the comment made. And it's an example of actually in a sense, in the sort of big macro picture, the tariffs most likely are bit of a negative thing, but they do also change the supply chains and competitive landscapes. And one example is that, of course, Harvia makes majority of our products inside the United States. So we are not fully insulated from tariffs as discussed, but we are better insulated than most of our direct competitors. But there's also this competition between categories in big channels.

And essentially, we know that many companies like the one mentioned and others have seen significant price increases, in particular products that have been imported from the Far East and making reassessment of their commercial potential in their channels and also, for example, for the kind of sales season campaigns. And this is something we have now seen that actually a category like sauna that seems to be resisting very well kind of the macro environment because the story of the category is so strong and partner like Harvia that can produce good value and much of it -- much of that value created in the United States are in great position.

Looking at the strong growth in heating equipment. Harvia has got more than 20% market share. No matter how you look at it, it can't be coming solely from new build or replacement at your existing customers. You must be converting non-Harvia customers into Harvia customers, coupled with upselling, the price difference between a digital control versus a basic heater. Can you comment on the drivers behind the strong growth in heating equipment?

Well, on one hand, the whole -- like sauna category is growing. And many saunas in the world are powered by Harvia. And if we think about just putting things in scale with Harvia, we talk about Harvia making -- we make clearly more than 200,000 heaters per year and give and take maybe 20,000 sauna cabins. And practically, that means that we have 10x more volumes in the heaters. And that, of course, tells the story that many saunas, which have been provided may be custom-made on site or maybe provided by some other sauna cabin providers actually use Harvia.

And the reason is very clear. We have excellent products, and we provide great value for money, but we also are very good at designing the products so that the market wants them, and we have efficiencies in production. So that, of course, leaves good margins for us. But ultimately, this is the dynamics. We want to keep growing in the equipment business. We see significant opportunities. And in terms of volume, in order of magnitude, it's significantly larger than the cabin business at the moment. But at the same time, we want to sell these full solutions because it does help us tap into much bigger spend potential in the key markets. So these sauna and heating equipment do complement each other, and I think we are well placed in both of them.

Looking at your LinkedIn pages, recruitment has ticked up quite a bit at ThermaSol and Almost Heaven Saunas over the past 2, 4 weeks. This matches the early indicators that sauna demand is already a lot higher versus previous year. Notably, it comes at the time of the shutdown. Here is the [ current ] shutdown meant. Are you impacted by the current shutdown?

I would say mostly no. That would be the answer. Maybe on the sort of recruitment, of course, if you think about a region that's growing 30% year-to-date and has a history of growth of 40% over a period of 6 years on average, of course, that puts us in a situation where we have opportunity and need to strengthen the organization. And I would take it also as a sign of confidence from the management side to the future of Harvia.

In the Q2 results information for Sweden, it was mentioned that consumer trade is expected to improve towards the end of the year as a new partner is being sought or started to replace Kesko. What is the situation with this? And if the partnership has already started, has it had an impact on the Q3 results yet?

Yes, I did touch upon it when I talked about North Europe as part of the presentation. The answer is yes. So for Harvia, when Kesko made the strategy alignment or like realignment kind of choosing to leave D2C technical trade in Sweden that left a big gap in our channel landscape in Sweden. And we have been able to bridge that gap, and we have started to work with the new partner, and that's going very well.

And Kesko is still selling our products also in Sweden with a slightly different concept.

In APAC/MEA, given that the multiple markets seem now to demonstrate sustainable growth, but you are partly dependent on relatively long logical routes from Europe. Are there opportunities for M&A? Or have you considered adding capacity into the region? The same note, are you delivering whole sauna kit solutions increasingly to the region? Can you give a little bit color on your outlook in that -- in this regard?

Yes. We do have actually a factory in Asia. So -- since 2005, so this is actually 20th anniversary of our factory in Guangzhou. We have, I would say, mini version of Muurame. So Muurame is an equipment factory that is also a volume factory. We have another volume factory, which is the China factory. On top of that, for the heaters, we have the value factory close to Frankfurt in the EOS home space. So we actually do have supply source in that region.

And the majority of the products we sell in APAC are the technical equipment. So if you look at the sort of the cabin full solutions business, it is very clear that the star of the region is North America. We do have ambition to also increase the full solutions business in Asia. We are already doing it mostly through partnerships. Some of the products, cabins are also shipped from Europe. And at the same time, we are assessing what potentially could be the right time for us to have sauna cabin factory in that region when the volumes would justify it.

Okay. Ladies and gentlemen, we have now spent exactly 1 hour with Harvia. I don't have any more questions on the list. Thank you very much for following, and let's sauna.

Thank you very much. Let's sauna.