Harvia (Helsinki:HARVIA) Q3 2026 Earnings Call

0:00 There is a very special place. Morning begins here. Finish stone, finish design. Held true for more than 75 years. Where mind and body meet. From the rush of the day into the hush of the night, as the city begins to glow, your special place is waiting. Here, a haven above urban life. Harvia, urban sauna, sauna as it should be.

0:56 Hello everyone and welcome to Harvia's third quarter 26 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.

1:07 Hello.

1:09 Today we have the normal agenda. I will start by first covering the key numbers and highlights of the quarter three business and financial performance. I will also say a few comments about our strategy implementation. After my part, Ari Vesterinen will be commenting more in detail on the financial performance and the details of it. So let's get started. Starting with the top line, Harvia's revenue increased by 17% to 53.9 million euros during the quarter. And all of this growth was organic. And all of the regions contributed to revenue growth growing double-digit. This growth was supported in part by approximately 4 million euros of postponed deliveries from quarter two to quarter three due to a major IT infrastructure and process upgrade program that we completed in our main factory and headquarters in Murome, Finland during the second quarter.

2:09 Overall, when we look at the markets, we see that the demand picture looks strong. It looks strong in North America. And also we see steady improving picture in Europe and many markets in APAC and Middle East and Africa. Although the exception is that the ongoing conflict in the Middle East seems to impact the Gulf region and also the wider region around it. Thank you very much. On the other hand, profitability was somewhat negatively pressed by elevated personal cost, other operating expenses and also somewhat higher depreciations that reflect our past investment in developing the business.

3:07 And of course, the current OPEX reflects in part our intent to invest in making this company stronger for the future. What comes to, for example, increasing firepower in marketing, firepower in research and development to make sure that we have the leading products And I will be talking a little bit about the innovation we introduced during the quarter later in this presentation. There's also a kind of one-time accounting adjustment that concerns regional North America, both in terms of revenue and adjusted operating profit. And that reduces on group level our operating profit by around 800,000 euros and revenue by around 700,000. I'm very happy to report that the process and IT systems upgrading in our main factory in Murome was completed successfully.

4:03 The actual goal I've happened during the second quarter, but due to that That change we had some weeks of not delivering during the quarter two. We have been catching up those postponed deliveries during the quarter three in fall that reflects that we are back in full speed, full capacity in our main manufacturing facility. We have also continued investments for growth elsewhere, including we have been expanding our factory in North America to support growth for the future years. And basically this expansion will be supporting us already now during this kind of just about to start winter season. That traditionally in the sauna market is the high season of the year.

4:49 We have also finalized the development of several new products. And I said I will be talking about this a little bit later. And I think that kind of the demand picture that we see generally all over the world, despite the sort of geopolitical and macroeconomic uncertainty, discussions about higher interest rates, consumer confidence, etc., Actually, we are quite encouraged by the steady picture, and I think it reflects the resiliency and the strength of the demand drivers to the category that we represent. Sauna, wellness and health in a relaxing, pleasant way is a story that resonates all over the world. And I'm personally convinced that the future for the market and Harvia is bright.

5:38 Now then summarizing the quarter three key figures revenue at 53.9 million euros and that's 17% growth compared to the quarter year before. At comparable exchange rates we grew by 16.2% and all of this organic as mentioned. Associate operating profit 9.5 million euros and that's around 8% more than the quarter year before and equaling 17.7% of operating profit. Thank you very much. So when the key selling season in the winter, including campaigns around Black Friday, Cyber Monday, etc., we have the firepower, the kind of inventory that allows us to grow also during the high selling season.

6:40 So that's reflected in the operating free cash flow. For the first nine months of the year, these are the figures. Revenue at 165 million euros, and that's around 14% growth. And at comparable exchange rate, around 16% growth, all organic. Adjusted operating profit, 31 million, and that's around 8% more than during the nine first months of the past year. And year-to-date, our operating profit margin is at 18.7%. Operating fee cash flow at around 15 million and cash conversion at around 40 million. When we look at the regional picture, of course, it's very pleasing to see that all the regions grew double-digit. This time, the fastest-growing region is Northern Europe, growing by over 20%, and North America grew by 18% in euros.

7:35 But then again, this region was impacted by the accounting adjustment, and without it, it would have been also a 20% growth region for us. Northern Europe, as said, grew by 23.5% to 13.7 million euros and representing one quarter of group total revenue. We saw positive development across the geography, including Harvia's home market, Finland, Scandinavia and the Baltic region. and of course the performance was supported by the deliveries that were postponed from quarter two to quarter three as the region is heavily skewed towards the heating business in terms of the portfolio mix we sell. At the same time it's also fair to note that Thank you very much.

8:46 Thank you very much. Produced by Hit Deliveries, some of which would have normally happened during the quarter two and happened now in quarter three. When we look at the country picture, there's always, you know, some countries a little bit up, some countries a little bit down, but overall the market continued to perform strong. Maybe a couple of highlights for this quarter, where the German speaking, Central Europe plus the United Kingdom.

9:38 North America, strong market demand continued and our multi-year journey had a logical next chapter in its history. So revenue, if you look at the left-hand side chart, you can see that it's pretty steady development and you can also take into account that quarter three in 24 and 25 were partly elevated due to inorganic growth. and quarter three this year was fully organic growth so I said pretty pretty steady line and reflecting the continued growth in interest and demand in northern American market that of course is very important for us and this despite all discussion about consumer confidence pending home home purchases etc etc we're pretty Pretty pleased and believe that this shows the strength of the category overall.

10:40 We had the steam equipment which is reflecting that a traditional sauna category, infrared sauna category are growing faster than the steam sauna category. APEC and Middle East grew by 12.3% to 6.4 million euros in Q3. And again, if you look at the kind of trend over the last four years for the Q3s of each year, it's a pretty logical continuation. Of course, Q3 last year was a very strong growth quarter, but otherwise it's a pretty steady straight line to that 6%. This region, we can see that some of the big markets that are strategic markets where we also have stronger own presence in the market like China, Japan continue to perform strong, good double-digit growth, whereas the ongoing conflict in the Gulf region is dampening the figures for the region somewhat.

11:54 When we look at the product mix, due to the postponed deliveries from quarter two to quarter three, which practically all of, otherwise it's pretty steady, but due to the kind of increasing share of heating equipment, then each of the other categories was pretty much like minus one percentage point or pretty much flat. So no major shifts there. And then looking at the growth across product groups, we can see that heating equipment was the growth leader, growing over 20%, boosted by the Murame production ramp-up and kind of fulfilling the order backlog. Saunas and Scandinavian hot tubs growing a good double-digit number. Steam products growing, but only a little.

12:47 This reflects the fact that our steam businesses Basically based in two regions, one is Middle East, where the conflict is having its toll on our business, and partly that in Northern Europe. So then, a few words about Harvia's strategy. Harvia is the market leader in a category that has in the past been what I would call a niche market, maybe more regional market, but now growing into much broader global wellness segment. And The strategy that we've chosen to take is that we want to be a market leader in offensive, inspiring, innovating, taking the market forward. And we want to be the company that shapes this global sauna market so that everyone has a reason to experience sauna.

13:38 And we are driving forward that strategy through what we call four strategic focus areas, answering questions, and deliver a fuller sauna experience to each sauna built to tap into a bigger spend potential as sauna market and more saunas are being built. Last year we were around 200 million company Thank you very much. Elsewhere, we also want to capture opportunities, but mainly through distributor partnerships.

14:37 To whom is that we want to be also having the leading sales channel, so access to the market. Best retail partners, best distributors, best country importers in, for example, Asia, and strong own D2C. and how it relates to the fact that we are a growth company. Every year we need to produce quite much more products to sell to keep growing. So we want to have efficiency, scalability. During this quarter, we've taken, again, many good steps on that journey. When we look at the products and portfolio, we have strong performance in full sauna cabin business in North America. Heating equipment, which is Harvia's core, grew very, very, very much.

15:25 Also, of course, boosted by postponed deliveries. But overall, the demand picture for the core business stays strong. And we've also been working behind the scenes on building more exciting products to our portfolio. and they are launched during this ongoing quarter four. And across the board, I'm very happy to see that the markets where we have stronger own presence, they are performing really well. So we generally talk about double the growth as the rule. And as we keep growing, kind of one part of our strategy is that we take more and more countries under our own sales, Thank you very much.

16:38 In developing the channel access in a sustainable, long-term way that will help us deliver hopefully strong results also in the coming years and quarters. Gross margin stayed on a healthy level, supported by balanced product mix, channel mix and also pricing management. A core part of Harvia's strategic thinking is that let's do more of what works and let's do less of what doesn't work. And one of the things that seems to be working really well is direct consumer web stores that have been helping us. And now as we... We started to kind of approach the high-cell and winter season.

17:25 We really see very rapid uptake in the incoming orders and that's of course a very Pleasing to see as we've been kind of working on building that new channel for our channel mix in continental Europe as well. In terms of best-in-class operations and great people, this kind of milestone of go live with the new IT infrastructure and processes was a major undertaking for us. Always also these projects come with elevated risk. and our delivery capability is good and that's of course very important for us as we now have just started the high selling quarter four, high selling quarter one kind of typically I said historically these are the big quarters so it's very important that the operational engine is in good shape and it is. and we've also been investing in expanding our capacity elsewhere such as expanding our factory in West Virginia which will be supporting our growth ambitions also this winter in the United States. So overall what we want to do is we want to grow and we want to build scalability in our business so that we can see operational leverage and efficiency across all functions and that work is progressing well. Now, I promised to say a few words about

18:55 the new products, and here are some products we've now launched for this winter season. Koski Q-View sauna cabin on the left-hand side is part of our... A goal of growing our traditional sauna cabin business, not only in North America, but also in the continental Europe. So really nice pod type form factor, full glass front wall. and very much something that the early feedback from the market is that this product has all it takes. Product launches we have done over the past couple of years is the launch of Harvia Phoenix control unit, which is our flagship full-touch control panel over the air, upgradable, etc., are really taking Harvia into the leading position when it comes to digital solutions for sauna and spa.

20:00 Now, with a new Harvia cinder, we're taking that Harvia Phoenix product, a product that the market loves, and actually brought it to lower price points. I would say a price fighter in this full-touch category. Really exciting product. We really want to elevate the experience also. At the same time, it's a very good product for Harvia. and then we also drive digital leadership elsewhere and one of the examples is that you can actually control selected Harvia saunas like for example when you have Harvia Phoenix control unit you can control your sauna and nowadays not only with your phone but even with your Apple smartwatch showing the opportunity to integrate into and other digital ecosystems and use them to enhance the sauna experience of the Harvia sauna users.

21:08 One of the most loved products is a product called EOS Mythes and it has now been... Thank you very much. Kind of the reflections that you would see on the surface of a lake. Very, very beautiful when you see that alive and creating sort of luxurious feeling in the sauna where Aerosmith is heating the sauna. And now I would hand over to Ari for the financial details.

21:53 Okay, here we see multiple quarters over the Q3 and Okay, there are always in accounting some adjustments, smaller or bigger, but we have certain internal threshold when we have a bigger adjustment and we seriously think that if we should flag that in the reporting and now we did it. And it's simply... Thank you very much. Now in Q3 and I'm not expecting similar adjustments in next quarter or so. But this is the fact. And if we now compare the quarter three with quarter three in...

23:20 If we look at the quarter three now isolated from the other quarters and calculate back the adjustments we had, 700,000 to the net sales and 800,000 to the EBIT, we were actually on with the net sales of some 54.6 million. So that would have met, okay, this is just a calculation, but anyhow that we had an adjusted EBIT of 18.9% during Q3. And it is actually very close to Q3 what we had a year ago.

24:13 And of course, people are asking that, hey, what about the operational leverage? You had higher sales and basically quite close to the same cost base. Why didn't you make any higher margins? Thank you very much. and also the depreciations increased.

25:02 It's visible in our reports about 400,000 compared to last year. So all these items, they cause the reduction of the EBIT level percentage somewhat. So here we see the main financial figures, and if we would have had, this is a bit of a theory, but anyhow, the adjusted EBIT also has the sales growth now. But, okay... We have had a rather good quarter. We have been preparing for the rest of the year and for the higher winter season since quarter three is typically in our business.

25:59 The lowest sales quarter at all. Okay, we got the boost from Q2 to Q3, about 4 million euros delayed deliveries from Finland. Now they are in the books, but we were also growing nicely without that effect. and we have been employing new colleagues in operations, in customer service, in sales, in many fields since we see really the further growth to come.

26:51 But otherwise, there is nothing very special in these financial figures in the big picture. The operative free cash flow, as Matias mentioned, it goes down typically in Q3 and then pops up, has done that in the past during Q4 when we ship and invoice the inventories. This has been the pattern in Q3. The leverage remained on a healthy level of 1.2.

27:38 A year ago we had 1.4 and this is much under our long-term financial targets. The net financial items, net of interest income and costs went slightly down. We have certain swap agreements which on paper in IFRS accounting might change this position a little, but they didn't have so big impact now in Q3 2020. and all. And we have continued the not as high as year ago. Year ago in Q3 we had 2.2 million hydro investments. We are looking forward to have the investment in U.S.

28:40 closed for the The expansion of the production facility but besides that we have also rented other warehouse capacity since we have been very strongly now producing for the Q4 campaigns during the Q3 and that's not really visible in the results yet. Harvia's long-term financial targets, just to repeat, we have them the same as in the past, two-digit growth, profitability, adjusted operating profit over 20%, leverage under 2.5%.

29:31 Harvia pays twice a year, the increase in five results was actually paid out in the beginning of this year. This week, sorry, this week. So, any questions? I have got here quite many questions in this tool, and let's start to go them through. First, quite US-related question, or US citizen, what's the impact of inflammatory pressure and on the cross-marching you haven't been able to Thank you very much.

30:40 Thank you very much. There's a strong reason to buy our product. People really love this idea of having wellness and health in a relaxing way. And that's basically the value proposition of sauna. It's kind of ancient wellness ritual that is backed by modern science. The second is that the market, we're still in so early phases. So maybe the situation would be different if there would be, let's say, 50% of...

31:25 American households would have already a sauna. But we talk about a tiny fraction of the American homeowners owning a sauna. So we're still the very $3,000 sauna from Costco made by almost heaven, Ari Harvia. So it's not so expensive product either. So there are many... Many households who have the interest and definitely have the means as the actual barrier to buy is pretty low. The price point is accessible. The buying process is easy. It's a pretty easy and rewarding assemble yourself project that you can do with and a friend in less than a day. So we see pretty solid demand in North America for the category and I'm very pleased about that.

32:24 Answer, Teddy, and I asked them anyhow, and you can comment on a general level. So what's been the sales decline in the Middle East?

32:38 Generally speaking, if you look at the Middle Eastern region, it represents around... What was the growth rate for Thermosol in Q3? We don't go into unit-based growth numbers, so we report the growth on the region level and also then, of course, product two for fetching conclusions about one practical unit in North America, because as I said, Thank you very much.

33:49 to what I call high-end home spas. And there's great opportunities for us to provide a broader portfolio of Harvia Group through the sales channel, which is then not visible in the steam figure.

34:09 Your hiring trends suggest strong line of sight on the high selling season. Thus, isn't Q3-26 just a reflection of the timing of the growth expenses and confidence in the top line growth? In Q3-25, if I remember well, you were more cautious on the same or it was, say, too strong on the marching side.

34:38 Well, maybe a comment here would be that The strategic position that we see for Harvia is that we're a global market leader in a growing category. And we want to be leading also in the future. And there's of course two strategies that you can play. One is an offensive strategy, playing to win. And the other one is a conservative strategy, avoiding losing. And I'm in a camp that... If you're basically building a growth business, there are certain risks you have to take. And basically, so that's of course why we have chosen this more like a growth-oriented strategy.

35:27 And if you look at, for example, now year-to-date performance, we can see that we are above our long-term target. We have chosen this growth-oriented strategy because we see so many opportunities in this category in the coming years. Personally, I'm in strong belief that Harvia will be much bigger company in the future than we're today. Great thing about growth is also that it compounds unlike kind of what I would call profit engineering, so the profit margin approach. but that of course comes with the kind of the downside that every now and then maybe you know one or two quarters might be a bit below the long-term long-term EBIT target setting but I said it's not like quarterly quarterly target that we've set for ourselves it's a long-term long-term target

36:30 Last month Almost Heaven Sound has got a business award and it was disclosed that a new investment of 5 million USD was about to get started. What's the timeline of this investment? And I assume this is on top of the recently completed investments.

36:48 Well, maybe kind of what I would call, maybe more like make a general statement. News like this should not really surprise anyone. And the reason is that if you look at our growth trend in North America, in the US dollar business, growing 30-40% was good. In absolute terms, the amount of products to manufacture is fairly easy still. Selling three to five million more next year than the year before already provided great tabulation growth. But now that last year we were close to 90 million US dollars in our Northern American business and we still want to keep growing strong.

37:43 Then the jumps in terms of absolute. Thank you very much. A floor space in our Lewisburg factory and that gives us a certain capacity increase but then again we're already thinking that you know what do we need to do to make sure that also the year after so the high selling season year from now will have the needed capacity so kind of the thinking is that you know we kind of Take the historical growth and continue. So that's the way we see it. So continuous expansion in North America to be expected, assuming everything goes according to our plans and assumptions.

38:46 I've also commented earlier that what we've done in Louisburg is, it's now pretty much like two years ago, we bought a quite significant plot of land around the factory we have there making the cabins for Northern American markets. And the first thing we did was really thinking that, kind of think big, assuming that this site will produce 5x the revenue. How would the site look like? And then we kind of walked back, kind of completed or about to complete, was kind of addressing the first bottleneck. And there's always the next bottleneck, and we'll systematically keep working on the bottlenecks to keep growing the capacity in line with our longer-term expectations we have for the market.

39:37 Okay, then there is a question which was actually partly already answered during my presentation. Can you walk us through all the elements that impacted your adjusted EBIT? Were these expected or did something come as a surprise to you? Well, the costs and the plans there, they were more or less in our plans. When we observe our sales deductions and revenue recognition and so forth, there are sometimes some things which have to be decided short term and effects which we didn't know necessarily or

40:26 We have, and maybe you look at the 10 last quarters, that it was maybe, you know, it's pretty much like on average level, but maybe I would say it could have been 1% higher. Then you look at the employee cost, it also could have been maybe 1%. Thank you very much. Hadn't had this adjustment, it would have been 19 and 19 quarters, so 19% sales growth at 19% EBIT margin, so not so far from the 20%.

41:17 Still a bit of a miss, but not so far from the long-term targets that we've set.

41:24 And if some of these costs were planned, do you expect a rebound in Q4, or should we extrapolate these into upcoming quarters as well? Meaning, was this cost pressure temporarily or does this continuing Q... Well, we don't go so much in the details of the accounting, but we don't expect a rebound. We don't expect the similar things, but we always inform the market if there are adjustments which go over the normal. Where exactly this has been and which parts of the business?

42:13 We have had a year ago in this time 728 persons and now 816. Would you like to elaborate the growth of the business?

42:28 Again, it's quite widespread, but waiting towards North America. Because it's simply more blue-collar workers in the operational facilities in North America to support continued volume growth. If I take you back... and before that we didn't have a dedicated sales or commercial approach in that geography at all so we kind of started from a very very very lean team in that place and we have made conscious choice that we increase firepower in say account key account management and customer service technical support Marketing, etc.

43:19 Generally, we've been building a region that is more professional, more self-sustaining, and ability to carry more of the responsibility for the group, even as it's becoming bigger and bigger in absolute terms, and also growing as a share of revenue as part of our Harvia group. So that's the We've been growing, etc. Some more firepower also in the global R&D, developing our digital capabilities. So quite many places where we've chosen to increase the firepower.

44:06 How should we think about the margin development for the full year? Year-to-date adjusted EBIT margin is below 19%. Is 20% level realistic?

44:19 I can't really comment on specific, because practically it would be... Thank you for giving forward guidance, which is not part of our policy. So I do need to leave it to you. Having said that, there of course is a slight adjustment, so under normal circumstances of profit. I said it's not too far from that level, but it is clear that we'd like to be, when we look at the long-term targets, very close and preferably even above them. Where we land this year, I'll be sharing that in three months' time.

45:07 Did the growth in North America meet your expectations? Have you seen any changes in the market demand since Q2?

45:16 So, if I normalize the growth in North America, so kind of neutralize the effect that this accounting adjustment had, because it was specific to North America, it was 22.5% growth, which is the regional performance is that actually I mentioned this you know look at the 10 past quarter so not just what what was happening the quarter before or the year before in that particular quarter and actually then you can see interestingly that there is pretty steady flight levels For the regions, so North America during the 10 quarters on a certain level, there's of course fluctuations, some quarters higher, where we could see kind of more like a bit like a gear shift to more positive is that northern European region had kind of If I'm looking at the past 10 quarters, the early part of it was clearly low, and now the past bit over a year have been on an elevated level. But within that, there is variation, so a little bit of vibration.

46:40 And there seems to be, so just an observation, there seems to be... A trend line, so we might then, it seems that in the history we have been a bit lower than after one year after a very strong quarter, and then the other way around. So if the quarter a year ago was a bit lower from the sort of flight level, then the probability that we have been kind of above that trend line is higher. And when you look at North America like that, actually it's very logical. and what we delivered. Overall, the long trend that we see is very strong.

47:25 Guide us how you plan to get about 20%. To what extent is the dip driven by competition or mix?

47:37 Well, I think competition and mix would be visible in the gross margin. Gross margin is over the past 10 quarters. We're pretty much in the average. Maybe 1% below, but pretty much in the average. I think that shows the strength of our competitiveness in the marketplace. And where does the EBIT come from? It's basically more like discretionary spending. So what management decides in terms of... Personal cost in investing in digital capabilities. Of course, it's a major transformation program to upgrade our operational capability through technology to bring scalability.

48:23 The boards and the management decision, how much do we choose to invest in building this business for the future, and how much do we optimize for the current quarter or the next quarter? and as I said then kind of the margins are also pretty small so if you think about just the P&L stack as I said if the gross margin would have been one percentage point higher and employee and other expenses one percentage point lower would have been clearly about 20 especially if you would even take into account this accounting adjustment I said quite clearly above 20 percent so that

49:04 Organic sales up 16% year to year, but adjusted EBIT only 8% year to year. Well, if you calculate back these adjustments, you can see this effect part. Would you like to otherwise comment?

49:25 I think we already discussed this. Basically, partly the complex level is management decision and it reflects our confidence in the future. The fact that we believe Harvia could be much bigger in the future and we want to be inspiring leader of this category. and partly it reflects the adjustment so if we would neutralize that adjustment then stop-line and EBIT growth would have been pretty much in sync.

49:54 How do you expect gross margin to develop in the future as a revenue

50:03 mix? There are certain kind of rules of thumb. One is that the farther away you go from Finland, the higher the gross margin levels tend to be. And the simple explanation is that In Finland, sauna is almost at every home. It's a very established and mature category. Whereas elsewhere, it's an emerging category that supports margin levels in the further away countries. The second is when we look at... The product mix, we tend to have the highest margin in what part of the business, which is the cabins.

50:55 But at the same time, the cabin business provides us significant opportunity to drive higher absolute profit. So it's very interesting for us, but still there is a bit this difference, kind of the margin of the equipment business tends to be higher. and then there's also this channel mix that when we sell through channel partners and they are very valuable for us and they provide market access for us and some of them very significant volumes but when we sell through partners The margin we make tends to be low in marketing, generating traffic to our websites, etc. Still, the margin of that business is higher.

51:41 So there is like this geographical, more like distance from Finland. Then there's a product category mix and also the channel mix between... Direct Sales and Self2Channel and it is really like a living picture we there's many many variables and overall the goal for us is to maintain strong growth margins because that's kind of the kind of The engine that keeps Harvia's growth machine running and allows us to keep investing in the future and also then supports this idea that as we grow then it will be easier for the operational leverage to fill certain gaps that we've identified but in the future We could see that the scale of the business overtakes and we still can invest what we need to invest in marketing and product development, but actually can get more of that all the way down to the bottom line of the increased sales.

52:49 How did in-store sell-through trend at key North American big box retailers during Q3? Were there any timing related factors around customer inventory stacking or replenishment that influenced the quarter as revenues in North America slowed from Q2? Thank you very much.

53:26 In North America, we actually tend to have very little, compared to the size of our business, very little inventories in the channel. I would say the mainstream model, how we work with our big box partners, is that actually they... have historically not carried almost any inventory we are kind of their drop shipment partner they sell a market and then take the order and we ship directly to then their end user the consumer so there has been very little in the in the channel now that has changed somewhat during this year as many of you know that we have partners that have now started to take also kind of goods into the regional warehouses and also Thank you very much.

54:31 Hopefully, they will be growing. That, of course, reflects that we have a longer-term history of the store sell-out. All in all, the partnerships work very well. The partners seem to be very happy with the contribution by Harvey and how we've been able to grow together. Now of course there's always this so-called channel concentration risk when you have certain kind of big product categories and playing with strengths that don't conflict the kind of big retail partners that we have and at the same time we have want to have a balanced mix of retail partners not just be dependent on one or two or a few but The work happens every day.

55:28 I'm pretty pleased with the steps we're taking.

55:33 Can we comment on the SKU listings for 2017?

55:38 I wouldn't go into the exact details, but when you look at historically every year there's something new. Partly it's a new product, like maybe price point or form factor introduction. Partly we are renewing the portfolio. One of the reasons why we knew the portfolio kind of ongoing offers to the market and kind of what was Good enough year ago might not be good enough this year, let alone next year. So there's ongoing, I would say, cross-margin engineering, also ongoing innovations, etc. So practically you can assume that every year we have new listings and some of the old ones drop out.

56:18 The Louisbourg expansion was completed in September. Well, there is still some work to do, but this is the question. Completed in September. How close to full utilization was the facility by the end of Q3, and how much capacity remains to support near-term growth? At what point do you expect to start the next phase of capacity expansion?

56:50 Maybe a few words. Despite the fact that we grew up in a factory, Finish Good Inventor for the winter selling season. So you can actually, that already should give you comfort that we have the firepower it takes to keep growing also during the high selling season. And I already answered in a previous question that practically we are looking at the base plan for capacity planning is that how much we have been growing on average over kind of multiple years in North America. We're expecting that to continue and that gives us the baseline of how much capacity do we need to prepare for the coming years.

57:35 Once this is completed, we'll start working on the next one pretty much straight away to make sure that year from now we have the capacity we need to grow and keep growing in strong double digits.

57:49 of the action plan and the underlying drivers of the performance. Are you still expecting growth trend to improve by year end as indicated earlier?

58:01 Yeah, so steam category looked better now than in the quarter two, so that should also give you some comfort despite the fact that the Persian Gulf situation has continued. Thank you very much. are the fastest-growing categories, and Steam's category grows a little bit less. And then the second, which is something I've already commented earlier, there's also opportunities for us to sharpen our own game, including channel management, account management, things related to product competitiveness.

59:01 At some point in time, I've said that we had this sort of 40-point action point list that we're And many of the steps have been taken and I'm positively viewing the future and hoping that you have in your own sales channel in North America. We don't go into the specific numbers, but strong growth. D2C has been one of the leading growth channels for us for many years already in North America. And strategically, it's very important for us because it allows www.youtube.com kind of what I would call the full power of Farvia so the broader offering that we can serve it's experience we can fully control and that's why we have internally a commercial go-to-market strategy that I would summarize right product to right channel at right price so we have some of the big box movers that we allow to start with price with standard product

1:00:32 our own D2C is still it's about volume products but with options so if you want to have like for example full glass back window wi-fi controlled heater maybe the cabin painted in black etc then the best place to buy it is our own website and then there's also a great offering that allows the more like specialty dealers who sell more premium solutions to shine in their segments so Each channel has a role to play and we want to have a synergistic multi-channel strategy rather than cannibalistic where we would be competing. It's what I just explained that each of the channel has a role to play and each of the channel add value to our numbers and add value to Harvia brand and market share.

1:01:26 Do you see the IT infrastructure and business process upgrade project having a positive effect on profitability?

1:01:36 I think in the future it will be supporting us. In the short term it has been actually dampening it. So basically it's a major undertaking. We have had consultants supporting us, etc. It's mainly a cloud-based service, so a lot of the... Thank you very much. and better utilization of for example AEI as a booster for productivity in our key business processes.

1:02:28 You spoke of the overall health and wellness sector growing, and Harvia transitioning from a niche sauna-only brand to a holistic solution provided to capitalize on this trend. How does your segment channel approach into P2P projects, especially hospitality and more tailored health and wellness destinations, play a role? for growth as opposed to B2C segments and does this specific mean adapting your commercial team to better control the winning of such projects?

1:03:09 We actually had a very interesting discussion with one of Harvia's long-standing management team members of 100 million people who go to saunas. So 5x more people who go to saunas versus how many saunas there are. And the difference obviously is explained by commercial and public saunas. So saunas in hotels, spas, fitness clubs, etc. And we look at the commercial applications from two angles. One is what's the direct business opportunity provides. So being kind of leader of professional grade equipment. We don't deliver full solutions like we do for the residential space, mainly because we can create the full solution for residential user in our factory, so the sauna cabin, plus the heating and control technology to go with it, and it's easy to ship to consumer.

1:04:08 Thank you very much. In the order of magnitude, clearly smaller than the consumer opportunity for us worldwide, because we can have Harvia saunas and cabins in tens of millions of saunas in the world over a long period of time. But it's also not just the business opportunity directly, but also brand impact. If you think about 100 million people go to So actually the commercial does play an important part of our portfolio and go to the market.

1:04:59 While revenue-wise, it's a smaller part of Harvia, so we're mainly a consumer company. from the Revenue Split, the types of products we make. But it does support us significantly as we build Harvia into the category-leading global consumer brand, because consumers see our brand, they're interested in playing there. We have a commercial sales approach as well and continue to do so.

1:05:32 Back to the numbers. Do you expect a visible negative impact to your material matching from the campaigns in Q4?

1:05:45 Well, again, maybe that would be a bit of a kind of forward guidance. But overall, we want to make sure that all business we do gives us a healthy margin. And as I said, sometimes the margin of error is pretty small, especially when you talk about rather big volumes. and I would say tightly priced entry-level products but kind of the key takeaway from my answer should be that all

1:06:24 How much are you investing in digital product development? What are the current and or projected returns from digital products?

1:06:34 Well digital is very interesting and especially now we talk about digital products and digital solutions and digital of course is very big like if you think about The AI strategy of hardware goes across the company. It's about operational. It's about enhancing sales. AI is part of the solutions. Digital is the same. So digital really cuts across the company. But when we specifically look at the product side of it, Digital, for the next five years, mostly plays a role that actually helps us sell our co-op product. So you can see here, for example, in the past couple of years has been Harvia Phoenix, which is kind of the digital interface in your sauna.

1:07:21 and it starts to be almost like a basic requirement to compete that you have to have much more advanced digital capability remote control software upgrades etc in the sauna control systems so the times have changed and for us to be able to be competitive and exciting with our core products they have to have a strong digital offering at the same time we're building uh Thank you very much. Recurring revenue kind of logic in our business and digital can help in that way.

1:08:17 Also in digital services, digital content. So it's very important for us, but in the short term, it's mainly about competitiveness of our core product. In the longer term, it really provides a very nice, very high margin upside to our business.

1:08:38 Thank you very much for your questions. There were also a few other questions which actually treated the same topics we were already answering, so I skipped them. And if there is any need for future discussion with the analysts and investors, we are of course available. We have to just check the schedule. International investors. So thank you for following us.

1:09:08 Thank you very much and have a good day.