Hello everyone, and welcome to Harvia's First Quarter 2025 earnings webcast. My name is Matias Järnefelt. I am the CEO of Harvia, and with me I have Ari Vesterinen, our Chief Financial Officer.
Hello.
As usual, we have this flow for the session today. I will start by covering the highlights of Q1 in terms of business results and also key activities. I will also shed light on the recent developments and progress in terms of strategy implementation. After that, Ari will cover the financial performance more in detail. After that, we're again welcoming questions that you can submit via the chat box in this webcast. Let's summarize Q1 first, starting with the top line. Revenue was EUR 52 million, and that's up 22.7% from last year. Organic growth was at 14%. We were pleased to see that all of the regions contributed positively to the growth, but clearly North America had a dominant role in driving growth for Harvia Group.
With these strong top-line results, we also saw broad-based growth across product groups, except spare parts and services, but all the main product categories contributed very nicely to this growth. Steam products is a real standout there with strong triple-digit growth, and that's because of the boost from our ThermaSol acquisition that we completed in the summer of 2024. Let's move to profitability and cash flow. Adjusted operating profit was EUR 11.9 million, and that's 22.9% of our revenue. This was a result of strong operational performance across regions and functions such as supply chain, operations, manufacturing, logistics, and very much also related to our pricing management.
In particular, in North America, which continued to grow very strongly, we had a smaller share of campaign-driven sales during Q1 this year versus the end of last year, and that did contribute positively to our gross margin and overall profitability of the group. Also, we saw very positive development in driving ThermaSol integration and driving growth and profitability with that acquisition, and that was also contributing positively to our performance. Cash conversion was solid at 73.7%. Of course, we all know that the beginning of the year has been marked by quite a lot of volatility and uncertainty in the global market conditions, such as trade policies and changes in, for example, consumer confidence in certain key countries. However, we are very glad to report that that did not have a real impact in the global sauna market and our performance during the beginning of this year.
Of course, it's true that in an environment that changes fast and is quite volatile, that might pose occasional challenges, but on the other hand, Harvia, we feel that we are very well positioned to handle essentially anything that is thrown at us, and we have a good ability to react to changes, for example, in the tariff environment. All in all, long-term sauna market outlook remains very strong. It's supported by strong long-term trends, and we are well placed to drive growth, both organic and inorganic, in the coming years. Here are the Q1 2025 key figures. Revenue, EUR 52 million, that's up almost EUR 10 million compared to our figures from last year, and essentially 22.7% growth. Organic revenue growth, 14% as mentioned, and growth at comparable exchange rate was 21%. Adjusted operating profit grew to nearly EUR 12 million, and that was 22.9% of our revenue.
Adjusted operating profit growth compared to Q1 last year was 18%. Very solid operating free cash flow at EUR 10 million, and that's cash conversion of 74%. When we look at the geographical split where the revenue growth came from, this, of course, picture is very pleasing in the sense that there are positive contributions from each of the regions. It is also very clear that during Q1, the clear standout was North America, which grew by nearly 60%. If you look at the growth euros that we can see in this figure, 80% of the growth euros came from North America. Northern Europe, continental Europe, saw modest growth. APAC and Middle East and Africa saw double-digit growth, but still on a bit more modest level than we saw generally during last year. I will be commenting on that in a moment. Northern Europe first.
Slight growth achieved despite subdued market conditions. 23% share of Harvia's global revenues and a revenue increase of 1.6% to around EUR 12 million. The market conditions and our performance was a bit mixed across countries. The largest country for us is Finland, and in particular in Finland, the market continued to remain challenging, essentially due to weakness in the construction and property market. On the other hand, we saw positive development in Scandinavia and Baltic countries, and we launched here a cylindrical wood burning heater, which we can see here in this picture, and actually saw particularly good figures in our wood burning heater product category in Northern Europe. Continental Europe continued to deliver gradual positive development.
When we look at the chart on the left-hand side, we can see that the growth momentum since the kind of market change since the end of the pandemic and start of the war in Ukraine and the steep decline in 2023, we are now in our second year of growth. The growth obviously is rather modest, but still this recovery progresses. On the other hand, we can see that if we look at the kind of long-term figures and trends in continental Europe, that we are clearly below the market potential, and essentially from our point of view, both North Europe and continental Europe are regions that provide growth opportunities for us in the coming years. North America clearly stands out, as mentioned. It has already experienced very strong growth for many, many years, actually since 2014. Every year we have been delivering very strong double-digit growth.
We did it this time at around 60% level. Now North America represents 42% of our global revenues, and it is clearly the biggest market region for us. There was a bit of a change in the dynamics for us from Q4 to this quarter. We had very strong growth also at the end of last year, but there we had quite significant impact from campaigns during the Black Friday and Cyber Mondays. This quarter, it was really driven by the majority of basically normal day-to-day sales. We also executed certain pricing changes to reflect changes in the material cost and cost of doing business in the U.S., and that also impacted positively our margin here. ThermaSol integration progressed really well, as mentioned earlier. Asia-Pacific and Middle East and Africa continued to grow. We grew on average last year around 50%.
The beginning of the year now has been a bit more modest at around 14%, but it's also the smallest geographical region for us, which is also prone to large project deliveries. For example, when we look at the Middle East subregion, we have quite a lot of project business in that region. On one hand, it contributed to really strong growth, over 90% growth in Q4 end of last year, but then again a little bit slower growth during this quarter. Our efforts continue to build systematic growth platforms in a number of key countries in this region, including Japan, China, and Australia. Let's look at the products. As you know, Harvia is the global leader in providing products and solutions for the sauna market, including all product and sauna categories: traditional sauna, infrared, and steam.
In terms of product categories, still heating equipment continues to be the largest product group representing a bit over half of our global revenues. Steam products grew significantly from low levels of 2% prior to the ThermaSol acquisition to nearly 10%. The other figures you can see here on the chart. We delivered growth very broadly across the portfolio. Heating equipment growing by around 16%. Saunas and Scandinavian hot tubs growing also at around 16%. Steam products clear standout due to the ThermaSol acquisition at over 300% growth compared to the year before. Accessories and heater stones growing at 17% and slight decline in the smaller spare parts and services category. All in all, a very, very solid picture that we are extremely pleased with. Now let's talk a bit about our strategy.
Harvia is operating in a really interesting market that is supported by strong long-term growth trends like health and wellness, increasing awareness, and people wanting to spend money on a good life. We have a great opportunity to drive our leadership strategy where we shape the market and continue to lead the market. We do that by our four strategic focus areas that answer to questions: what, where, to whom, and how. What reflects to our portfolio. Where reflects geographical focus where we place our biggest bets and focus. To whom reflects to our channel strategy and marketing. How to our operational capability and people. We did execute our strategy systematically also during this quarter in terms of portfolio.
Strong performance in our traditional stronghold of Nordic and traditional saunas across equipment and also the solution side of the business, and that means sauna cabins and sauna kits. Steam, very, very strong performance with our ThermaSol acquisition. Also strong performance in the premium price points in the U.S. supported with ThermaSol, and also strong performance by our high-end brand in Europe called EOS. We also have been working now already some time on strengthening our innovation pipeline, and I will be talking about our new product launches in the next slide, but they are already delivering positive impact to our top line, and that's very good to see.
In terms of our geographical progress, North America obviously is a pivotal market for us, and we are very pleased to see that our systematic efforts to build the business there across price points, across product categories, across sales channels is paying off, and we saw really strong performance there, as you can see from the figures. APAC and Middle East and Africa, they're also very systematically working in the biggest markets that can have the biggest opportunities for the long term: China, Japan, Australia. The work progress is very well there as well. In Europe, we're working to change the trends. Now, a couple of years, the market has been quite subdued. We consider that Europe is turning more into an opportunity for us over time, and we want to make sure that when that happens, we are best positioned to capture the growth opportunities as they emerge.
In terms of leading in the key channels and branding, again, strong steps forward there. When we look at our channel split, we can see again nice broad-based progress in our main channels in the main countries. We have been working with our new ThermaSol team on the product side and also branding side, and ThermaSol has now recently launched a kind of new brand identity with visual side of the brand also refreshed, and the response from the market and our key customers is really solid there. We also have been working to update a very important part of our channel portfolio, which is our own direct-to-consumer channels in the U.S. We have recently updated the almostheaven.com website, which is the main channel for us to sell our entry-level sauna kits under the Almost Heaven brand.
In terms of supporting our excellence in operations and competence development, we've been also taking the company forward. There's been a number of investments across our production units, including layout improvements, new machinery, etc. We are also working to simplify and modernize our group IT and to allow for new business models for us in the future, as well to support our continued growth globally. ThermaSol integration has also been one of the key topics on our operations side, and integration has progressed really well, in fact, even somewhat ahead of our plans. I'm very pleased to say that our Harvia US North American team and ThermaSol team are really working very well together. It's almost like a seamless one team already now, less than one year after the acquisition.
I said that I would be briefly covering some of the novelties, and here are a selection of them. On the left-hand side, you can see a wood burning version of the cylindrical heater. This has been a very important launch from a short-term business perspective for us because cylindrical is one of our top-selling heater product lines, but it was never available in a wood burning version. For the first time, it is now available, and the response in the market has been really good, and that has been contributing already now very nicely to our performance. The next example is the world's first solar-powered electric sauna. This is a really nice example of a market leader rethinking and driving sustainability forward. It's essentially a sauna with a very intelligent structure that is very lightweight, absorbs only very little heat when the sauna is being heated up.
It's well insulated, and because of that, you can run it very well with a more low-powered sauna heater, which can then be driven by solar power. That is really an exciting novelty that we've introduced. Now, in our mid-range of control panels, we have introduced Harvia Fenix to succeed the Harvia Xenio line. Fenix is not yet available in the market. The sales start will be a bit later this year, but again, a really, really strong response from our key channel partners. Also, in the U.S., which is a very important part of our business, we've been continuing to develop our portfolio with the launch of Blackwater Cube Sauna, a little bit new form factor for Almost Heaven saunas, and that also has been received really well.
Now, with that, I would hand over to Ari, who can comment a bit more detail on the financials.
Okay, thank you. Here we can see the development of two years of the quarters, the net sales, and the relative profitability in terms of adjusted EBIT. Frankly speaking, Q1 2025 was all-time highest sales quarter for us. We are also happy to see that the relative profitability improved tremendously compared to Q4 based on certain actions we have taken. Here we can see for the first quarter, the main financials compared. The adjusted operating profit went down a little compared to last year in terms of percentage, but money-wise, it improved. The percentage is going down a little in this quarter because of the growth investments we have had.
On the other hand, we were able to improve our material margin, margin after material and service costs quite much, and that improved then the relative profitability of the quarter. The basic earnings per share, they went 12% up, and the operating free cash flow was also rather strong. In money, a little lower than a year ago, but there are certain reasons. We have been investing about EUR 2 million. Last year, we had a total year of EUR 6 million. I think that the investments will get a little higher in coming quarters too. The net debt we had end of Q4 was EUR 57 million, and we've been able to go down to EUR 51 million in three months. It's still quite much higher than a year ago end of Q1, and that's because of the ThermaSol acquisition and increase in networking capital. The leverage is 1.1.
Our long-term target is to stay below 2.5, so we are still really clearly below that target. There is a lot of, let's say, headroom to take, for instance, more financing for interesting acquisitions or whatever. The networking capital is actually one third higher than a year ago, and also a couple of million higher than end of last year. The main reasons for the increase of the networking capital are the fact that we have actually one new company in Texas, ThermaSol, which we did not have end of Q1 a year ago, and we have also increased our inventories in certain spots in Asia and in Finland. The trade receivables due to the higher sales have increased also somewhat. The equity ratio is very healthy, 48%, and we have got also a lot of new colleagues in the group.
Now, end of the period, we had almost 730 people. A year ago, we had 625, about 40, actually exactly 36% of the growth comes now from ThermaSol and the rest from the organic growth of the staff. We are growing. We have been also investing in white-collar product development, business development people, and in the production facilities. We have the strong cash conversion, and that's typical for Harvia. We generate a lot of cash, and the operations themselves, they don't need a lot of investments. There is always internal cash source for dividends or acquisitions or other development needs. The net debt is also going down due to the good cash conversion and cash flow, and yeah, we'll see how low it will go, but it creates also the possibility to make further moves in future.
The net financial items in our IFRS P&L, they have certain calculatory items, always interest to swap valuation, now also some internal currency rate, exchange rate things for internal loans and so forth. In terms of cash outflow for financing costs, we are actually going now slightly down. Here we see the growth of the investments. We invested in production facilities, some IT systems, and we will also invest in future, especially in North America for the future growth. Harvia's long-term financial targets, just to repeat, growth, two-digit growth, profitability, adjusted operating profit margin over 20%, and leverage under 2.5 clearly. We pay regularly increasing dividends with biannual payout, and actually the first payout for this year, 2025, occurred already in April, and the next one will happen at the end of October 2025.
Just the remark that Harvia has a long tradition, the company is already turning 75 years, and we have certain parties and special activities events also for our customers and partners during the year. Now it is time for questions. I have actually got already plenty of questions here in the chat, and I start from the oldest, and we will answer as long as we have questions here. The first one, what was the organic sales growth in North America? I can probably answer that. We do not disclose separately the areas or the numbers of newly acquired companies. Of course, we can comment them softly, but I have to say that about half of the growth in value that we had in Q1 came from ThermaSol and half from our old operations.
By the way, if you compare the Q1 growth in North America with Q4 growth, actually in value, the Q1 growth was even stronger than Q4 growth. The percentage went a little bit smaller, but since the base is already higher, the growth continues very strongly in value. A couple of other questions concerning ThermaSol. Probably you can take them. How has ThermaSol's performance been in Q1 compared to 2024 in terms of sales and margin compared to the 2023 ThermaSol numbers you gave at the time of the acquisition announced?
Yeah. All in all, we are very pleased with the ThermaSol acquisition, and actually ThermaSol is contributing in many ways to the current and we believe also in the future success of Harvia Group in the United States and over time also in particular in the steam category also internationally.
ThermaSol has helped us to actually build and open new sales channels. ThermaSol had some really interesting customers for the high-end home spa solutions, and we have been able to grow the sales of ThermaSol's core portfolio, but also actually we're increasingly introducing additional products from Harvia's existing high-end portfolio to ThermaSol customers. That's just kind of one example. ThermaSol is also providing a great digital platform for our high-end solutions. You can go to thermasol.com and see some of the control panels that are really beautiful, large Android-based screens where you can basically control fully the sauna environment with the lights, the audio system, the steam, the water, and actually, for example, if you want to watch Netflix or listen to your favorite tracks on Spotify.
Now, in terms of the numbers, progress is strong, both in terms of top line and also in terms of bottom line when we look at the comparison figures from last year.
Do you expect ThermaSol to reach the same margin as the overall group, or do you see any obstacles for that to happen?
Our goal clearly is that our larger units have always the target to be at 20% or above. The idea is that the main units need to be contributing positively to our group margin structure. Still today, ThermaSol is somewhat below that, but as I said, the trajectory is very promising, and we believe that it will be above 20% in the future.
When we last summer announced the acquisition, we also talked that our estimate of the synergy savings or synergies will be a value of EUR 1.7 million until 2027.
We think that we are now actually ahead of the schedule at least realizing these synergies.
That's right. Yeah.
Can you talk about price increases implemented recently? How big and when in which markets?
Yeah. This probably refers to a few things. One is the quarter four last year gross margin and hence also EBIT margin development, which was somewhat lower than you're used to seeing from Harvia. That was mainly driven not by a general price reduction, but aggressive campaign pricing, and those campaigns turned out to be very, very successful. In terms of absolute sales volume, there was quite a lot of campaign sales affecting then our quarter four sales.
During quarter one, in fact, we have been delivering some of those orders that we took in during those campaigns still, but a clear majority of our business in quarter one has been based on kind of normal pricing, i.e., not campaign pricing. Now, of course, we are closely observing various factors affecting the cost of doing business or cost of producing our products. For example, material prices, material prices in the key material classes like wood, glass, steel. We are, of course, also looking at the impact of import duties to our operating environment, and from time to time, it might also have a bit of an impact on our profitability. We take that into account. It is a broad-based kind of set of considerations we look at.
We have increased now also the general pricing level somewhat, given that the cost of doing business also there's drivers to drive that up.
Were heater sales in the U.S. boosted by pre-buying due to tariffs?
It's a good question. I don't think there's a clear answer to it. All in all, we see that the U.S. provides massive opportunities for us also in the coming years. The dynamics is the fundamental dynamics is still there. American consumers are really interested in their well-being, good life. Sauna penetration is still on a very low level. We talk about around one million saunas in a country of nearly 350 million people. In terms of sauna penetration, we are at a low level.
For example, if you would compare that to swimming pools in residential use, and there are more than 10 million of them in the United States, if you would get to the same levels as the swimming pools in the United States, you would see basically 10x growth in the number of saunas in the United States. There is so much opportunity for us and so strong drivers that we feel that the long-term drivers and prospects are very positive. Of course, there is some more volatility in the market that might impact temporarily the figures that we report, but it is overall looking good.
Okay. One question, having a little repetition to the price increases, but anyhow, I will ask it. Your gross margin was very solid at 66.3%, up 170 basis points versus last year. Could you elaborate on the key drivers and detractors?
Is there still incremental pricing to be implemented? What's the situation in Germany? Does EOS continue to outperform?
All in all, pricing, of course, is one of the core competencies and key success factors of any companies. At Harvia, we think it from a couple of angles. One is that pricing has to support our growth path. We want to be winning business and kind of increase our market share and provide solutions that are worth the money for our customers and consumers. On one hand, that's one consideration. On one hand, we clearly understand that we can finance our growth initiatives through maintaining high enough gross margin. It's really kind of balancing both of these, top line and profitability. Clearly, our goal is that we consistently deliver both.
Consistently delivering both strong top line development at good, healthy margins that allow us to keep developing the business. As we see so many opportunities, and at the same time then, from the opportunity point of view, we see also some needs internally where we need to increase our efforts, such as product development, channel development, stronger digital offering as part of our portfolio, even stronger digital channels to the market, etc. That profitable high gross margin growth allows us then to make the company also stronger for the coming years. In terms of EOS development, it is a very strong unit in the Harvia Group portfolio.
Many consumer discretionary companies indicated that starting mid-February, demand patterns have been choppier. Have you seen any changes during the quarter, and has there been a shift in sales channels?
To the extent you want to comment on this, has April been consistent with Q1 performance? And related to this, have you seen trade down across product categories, whether it be on the residential or professional segment?
I can really comment on the quarter one and the long term. As you probably know, we do not disclose short-term outlook. During quarter one, we saw strong broad-based demand across price points and across product categories throughout the quarter. As I explained, we believe that the long-term growth drivers are very sustainable in the United States. We believe that Harvia will be a much bigger company in the U.S. compared to where we are today.
Many consumer companies have pulled their guidance, including Masco, which owns Sauna 360. Harvia does not provide short-term guidance, but your Q1 result saw that.
To put it simple, Harvia can do whatever it wants to drive strategic long-term growth. Do you plan to increase expense growth to accelerate market share growth, especially in the U.S.?
Thank you for the comment. We feel that we are well positioned to maneuver the current market environment and also to capture the long-term growth opportunities. That's for sure. Maybe kind of one additional comment that I could make here also in relation to the previous question on the U.S., and I commented a bit the demand side that we saw in the United States during quarter one, which throughout the quarter was very solid. The other comment that I'd like to make is that when we think of the key source of uncertainty, basically it's the import duty environment. Harvia is, we consider, well positioned to navigate these choppy waters.
The key reason for that is that around 70% of the products we sell in the United States are made in America. We have two strong production facilities, one in Louisburg, West Virginia, which we have had since 2018, and the ThermaSol production unit that we acquired last year, which is based in Round Rock close to Austin. That high share of domestic production inside the United States, we feel that shields us to quite a large degree from the changes in the import duty environment.
Okay. Can you talk about the organic attack on the IR market, infrared market in the U.S.? How is it progressing? When will we see effect?
Right now I would say that Harvia's business clearly predominantly comes from products and solutions for the traditional Nordic sauna type.
Now, with the ThermaSol acquisition, we have made a clear step change in the steam side of business as well. Still, of course, only at around 10% of our top line. Infrared is smaller than steam at the moment. In terms of our organic development activities, I do not think you have really seen the kind of outcome of our product development nor the kind of market entry plans yet. That is something that we feel is a clear upside to the future.
There is one question about material margins. I think we discussed it, but the follow-up, have you been able to pass higher wood costs in the U.S.?
Yes. Quarter four, no, quarter one, yes. Yeah.
Can you discuss the upgrades you have made in Almost Heaven Sauna distribution and what are your plans going forward?
Also, if you could touch the cross-selling synergies between Harvia and ThermaSol.
Yes. We acquired ThermaSol for actually a number of reasons. One is we wanted to clearly make a step forward in making Harvia a true global sauna solutions provider. We were heavily dependent, and as discussed in the previous question, on just one sauna type, which is the Nordic Scandinavian traditional saunas. We definitely are eyeing on Steam, infrared, and also cold wellness, which is a temperature-related wellness and natural wellness kind of product category. With ThermaSol, we have gotten what we consider critical mass and critical competencies for us to really stride forward with our growth plans for Steam.
The plan is that we use steam core technologies from ThermaSol to support, on the one hand, continued core business growth of ThermaSol, but also introduce steam products across our brands and channels, both in the U.S. and also in the coming years internationally. That is kind of one aspect. The other aspect was that ThermaSol and Harvia US, prior to the acquisition, the channels were quite different. The channels are very complementary. ThermaSol is mainly playing in the kind of very high end of the kind of home spa market. You could consider kind of high-end residential homes where you have almost like a real mini spa in your house. That was the kind of sweet spot where ThermaSol was playing, but actually had a somewhat limited portfolio.
This is another obvious top-line synergy opportunity for us, which is that we are now taking our high-end products from different parts of Harvia Group or different product categories, increasingly starting to introduce them to ThermaSol high-end channels and high-end customers. During quarter one, this did not have a material impact. The growth that we are experiencing in ThermaSol is actually based on a favorable development in the core business, which is a very good thing for us. In the future, we believe that we can actually deliver quite nice upside with that cross-selling. The third reason we bought ThermaSol was the advanced digital solutions. As I mentioned earlier, you can go to www.thermasol.com to see the high-end control panels, Android-based, really nice that we can also utilize across Harvia.
Actually making people-wise our total organization, including Harvia US and ThermaSol, stronger in the United States. I think we got really good people from ThermaSo l that are complementing really nicely the competence and experience of our really good people that we had on the Harvia US side prior to acquisition. I think from a people point of view, we are also really well placed for the coming years.
There is again the question about the pre-buying activity among the customers in North America in anticipation of the tariffs. Did we say that it was not so clear? They actually did not know. We did not know how the tariff will evolve. There was no clear pre-buying pattern. Does the inventory buildup mean that you anticipate continued strong demand? And have you seen limited impact from tariffs so far?
Yeah.
Essentially, there's a few factors affecting that kind of increase in networking capital or kind of inventory of goods in terms of materials and also finished goods. One is that we have now more companies in the portfolio, as Ari mentioned. ThermaSol inventories are now part of Harvia Group inventory. We've also been building new country capabilities, such as in Harvia Japan, which have led to a need to have the core portfolio to sell and serve those new markets in Asia. In the United States, it's very much driven by overall strong growth trends that we have been experiencing in the United States. Also from the fact that we consider there to be a lot of opportunities for us to play more broadly in the United States.
If you look at essentially the historical revenue streams that we have had in the United States, you could summarize it into heaters for Nordic-style saunas, plus rather low-end sauna cabins under the Almost Heaven Sauna brand. We know that there's a lot more opportunities, for example, in the sauna cabins and kits in the medium to high price points. To introduce those new models to the market and capture even more of the emerging business opportunities in the United States, we are also expanding the portfolio that we have available. That means also first we bring them to our inventory and then we start selling. That, I would say, strategic growth in new product categories is somewhat also impacting the networking capital development.
This next question certainly refers to Q1.
Were there any impacts on your profitability from lower-priced promotional sales, assuming that some deliveries from Q4 were completed and recorded to the sales during Q1?
There were some. Some of the orders that we received during the end-of-the-year campaigns end of last year were still delivered and invoiced and recorded in our P&L during quarter one. Predominantly, the sales was coming from sales that were not campaign-driven. We have also implemented, as mentioned, price changes during the quarter, and some of them will be taking full effect in the quarters to come.
From EBIT margin point of view, is your positive view on operating leverage intact, assuming benefits when volumes in Europe recovers? Can you comment about your capability utilization in Muurame?
Operational leverage drivers are fully intact and essentially come from the fact that we have high gross margin business.
When we scale the business up, that's definitely a positive driver to the overall profitability of the group. You have to also consider a bit the strategic position that Harvia has. Sometimes I'm getting also questions about the increase in the OpEx, for example, in terms of personnel. You can see that we have roughly 100 people more now than a year ago. That relates to the fact that we see a lot of opportunities for us across channels, different products, digital, etc. We are building capacities and capabilities for the future.
The kind of way we look at it is that right now, the growth model of Harvia is based on sales growth at high gross margin that gives us then gross margin in absolute euros or dollars that we then use and allocate based on the assessment that where we can best drive strategic long-term growth, but at the same time deliver then that plus 20% EBIT. It is actually a little bit like target-based kind of OpEx planning that we have so that we can deliver actually all top-line growth at healthy gross margins and strong EBIT at the same time as we are making the company stronger for the future.
We would anticipate, I think kind of my thinking is that we have quite a lot of needs to strengthen our capabilities and the teams and portfolio over the next three to four years, and after which there probably is going to be more diverse paths in terms of top line. Hopefully, it keeps growing very strong, but maybe we have then at that time then filled most obvious gaps in the capability and portfolio side. We do not have to then maybe invest in that much there.
How do you see the U.S. market developing during April? Any feedback from your customers regarding possible changes in consumer behavior or demand?
I can comment really quarter one, which was very strong throughout the quarter and very broad-based demand. Of course, we have also taken note that if we think about the macro environment, there are a few things.
One is the import duty environment that is mainly then affecting the costs, but it also clearly impacting the overall consumer confidence in the United States. We have taken a note that the consumer confidence now is on its lowest level in the United States in 12 years. In quarter one, it did not have an impact on us. Time will tell kind of what will happen in the, I would say, in the short to medium term. As I said, long-term growth opportunities are quite massive in the United States, and we are confident.
What general comments you can do on how the sauna market performed during a recession period, especially in the U.S.? Do you have historical data on that? Could you remind us your market share in the U.S.?
Maybe Ari, since you have a longer history in the sauna business, you can reflect on this recession topic.
Yes, yes. I just checked it for certain analyses, and I found really old data before our IPO period. Of course, Harvia's structure and business was a bit different compared to today. In 2008, when the Lehman Brothers happened and the financial crisis came, actually nothing happened to Harvia's sauna and heater sales, except the growth was flat. The year after that, the sales declined about 10%, and the second year after that, they bounced back with + 16%. Of course, the graphical distribution was different and so forth, but this shows, first of all, that this industry is slightly behind the cycle, and it is also quite resilient, not reacting as strongly to financial situations as, for instance, the construction business. Not at all.
This is a healthy business, and people in this business category or product category, they are not spending their last money for sauna. They can still afford that rather low investment for their health.
There was a question about market share. Essentially, this is quite an interesting market because this is still a specialty market, which we believe is turning into a real volume market, placing Harvia strategically in a really interesting position for the future. One of the challenges that we have is that there are no foresters or gardeners of the world making market studies and quantification and forecasts for this market. We are very dependent on our own assessment and what we see in the market and hear from our channel partners. Our understanding is that our market share in the United States at the moment is a little bit below 10%.
That also demonstrates the fact that this market is still quite underdeveloped in the competitive dynamics. A lot of players are rather fragmented, and that also provides a lot of opportunity for Harvia, not only to grow organically, but also be a market orchestrator and shape the dynamics through acquisitions.
Are you planning to start manufacturing of traditional heaters in the U.S. to avoid possible tariffs?
All in all, we think that we are, as I explained, in a pretty good spot to begin with, with over 70% of what we sell in the U.S. being made in America. The notable exception is the heater category. We have heater factories in Finland, Germany, and China. In particular, Finland and China are what we would call volume factories, and then Germany is what we would call a high-end value product factory.
You could consider China almost like the mini Finland factory, which has very similar capabilities. That really allows us the possibility to shift production quite flexibly. It's not like every day or every week. In that rhythm, we could so fast change production. In a few months' notice, we can actually change production of one model between China and Finland. That also already provides us quite a lot of flexibility to navigate kind of these sort of turbulent import duty kind of choppy waters. Of course, as we always do, we always look for opportunities to do things even better, more efficiently, faster, more agile, with better kind of efficiencies. Part of that is that we're constantly looking at our manufacturing footprint, which is essentially answering the question, what products we make where?
Now, of course, we have taken a note that the U.S. has grown significantly. We are really looking at what would be the point in time where the volume triggers would justify also kind of opening further manufacturing capabilities in the United States. Of course, it's quite hard to make these kinds of decisions based on import duty environment because basically it's almost like you wake up in the morning and check what's the situation today. In such a volatile market situation, you don't want to make decisions for many years to come. You can do these decisions if you really believe that, yes, the critical mass starts to be there and also the long-term growth outlook remains strong. We are contemplating those thoughts.
Do you have any possibilities or plans to get revenue from something else than purely selling new products, for example, service or some recurring elements?
Absolutely, yes. What Harvia is about, we are about products and solutions for the global sauna and spa, and I would say thermal-related wellness market. We are interested in high-margin, global, scalable opportunities. We are not in the business of building saunas, sending carpenters or engineers across the world to build saunas or manage construction projects. We are an industrial player because industrial activity is scalable. The other obvious opportunity for scalable business is digital services. As we acquire ThermaSol, you can see the level of technology already there. Android-based control panels, even on Harvia's core portfolio, increasingly our products are Wi-Fi-enabled. They are connected devices out there, and the fleet of connected devices is continuously increasing.
We do see a future where Harvia has a possibility for not just hardware product-based business models, but also selling software, software upgrades, capability upgrades to the portfolio and fleet out there, and also digital services. For example, we are contemplating and have been contemplating ideas around, for example, sauna wellness programs that would be customized for individuals' health and wellness needs and goals. It is actually a pretty interesting field. Harvia is a company with plenty of opportunities.
In the big picture, selling heaters on the more mature markets or already grown markets is also a recurring element. About 70%-80% of our heater sales are actually replacement sales, for instance, in Nordics or in Central Europe.
We counted already a long time ago that when the sauna cabin lasts, for instance, 20 years in private use, normally the owner buys one additional heater or replacement heater or even two replacement heaters when the heater generations develop. We are really in the replacement business also, and that makes a lot of resilience for our business model. Practically, as we keep growing, we are also building the future install base for replacement sales and also, for example, digital services and accessories.
Yeah.
How do you see U.S. demand for your products if general consumer confidence and consumption is going down?
It's a, of course, good question, and we do not have a crystal ball. I said, ultimately, we think that there are a few things that support our business. One is that it's a big country with actually relatively few saunas still.
So around 1 million saunas in a country of 350 million people or so. That is around one sauna per 350 Americans. If we compare that to the sauna penetration, for example, in Germany, it is one sauna per 34 German people. That would point out to 10x growth potential in the United States. Another example pointing out to this 10x growth potential is the number of swimming pools in residential use in the U.S. Basically, we have really kind of fundamental growth drivers, and the opportunity from this sort of fundamental perspective is very solid. Now, it is a big country, and there are a lot of millionaires. I think the number of American citizens that are dollar millionaires in terms of their kind of actually investment ability, even excluding the houses, is about 20 million.
That also points out that if there's more than 20 million dollar millionaires and basically around 1 million saunas, we think there's going to be plenty of people who have the means to buy better life, better health, better well-being also when the economic times are a bit tougher.
The changes in sales operations in North America over the last year, especially post-acquisition of ThermaSol, have changed quite a bit in a positive manner. Thank you. Can you speak on the stability of key leadership personnel in Harvia, in ThermaSol, especially for longstanding partners who value the relationships that you have been building over the years?
Yeah. I think we have a good mix of change and stability.
As a company, we are growing, and as our business is becoming more diversified in terms of geographical footprint, types of products we sell, and the type of channels we operate, we do need new capabilities and also management talent in the organization. We have been really successful in attracting very high-caliber new leaders in the organization. One example, around one year ago, a bit more than one year ago, we recruited Jennifer Thayer, with a very strong background in kind of durable consumer goods retail, a highly commercial person with great values fit to Harvia. She is doing great. We recruited during last year a new leader for EOS, the high-end brand, global master brand for Harvia, as the previous entrepreneur and owner who had sold the company to Harvia in 2020 left the group. Again, a very strong recruitment.
Actually, now right after quarter one, first of April, we had another new person starting, Ivan Sabato, who is coming from Technogym. Again, a very relevant company, high-quality business with a wellness product that is price point-wise, size-wise, and also technology-wise. There is a lot of similarities with what we sell, and Ivan Sabata started, as I said, first of April. We have new talent, but we have also very solid, long-serving Harvia group team members in the group management team and also in other key positions. I am very pleased with that. We always try to kind of balance things right. It is about driving sales and profit. It is about having the right new competencies, but also the experience and relationship and stability. That is the way we drive business. What comes to ThermaSol, the key people we wanted to stay are all with us today.
From more or less like from HR perspective, just to remind that a lot of our people are actually Harvia shareholders, and we have also quite wide long-term incentive programs that our key personnel, they have parallel interests with our shareholders to increase the value of the company. They get their fair share of that value increase also after minimum three years. The last question, if no other questions are arriving. What competition are you facing in the U.S. in the medium to high-end range sauna market? Who are your key competitors?
There is a really broad sort of broad base of players across price points and across sauna types. Typically, they are very different. We do not have like a one single that's the arc competitor of ours. It is more like it is still very fragmented market. There are plenty of players.
What comes to steam competition or traditional sauna competition in different price points, basically we see different players. That would be really the situation today. We believe that there is going to be a rather significant consolidation phase going through this industry over the next five years for actually many simple reasons. One is that as just simply the business keeps growing, importance of brands, importance of being present in the best sales channels becomes more important. When the products get more technical, the smaller players have a really hard time in keeping up with what's required to be attractive and competitive. Brands will have a more important role. Also, ability in certain customer groups to provide kind of full solutions or broadly everything that they need for their spas and saunas.
There is quite a lot of reasons why we believe that there is going to be quite significant consolidation. Maybe in the future years, there is going to be more clearly key arc competitors to us in the U.S. Right now, it is a rather fragmented market.
I think that was it. Thank you for following. Thank you for great questions. See you.
Thank you very much and have a good day. Bye.