Cherry SE (C3R) July 2026 Conference Transcript

Ladies and gentlemen, good day and a warm welcome to today's earnings call of Cherry SE, following the publication of the preliminary half-year figures of 2026. I'm delighted to welcome the CEO, Jorge Volma, and CEO for Jürgen Jongma. The management will speak in a moment and guide us through the presentation and the results. After the presentation, we will move on to a Q&A session in which you will be allowed to place your question directly to the management. We are looking forward to the presentation now. And with this, I hand over to you, Mr. Vollmer, please.

Thanks, Ingmar. Good afternoon, everyone. Thank you for joining Jerry's first half 2026 earnings call. I will start with a general update and some investment highlights. as shared during our last update call we focus on stabilizing and simplifying cherry and focus on what matters first on stabilize we are aligning the cost base to the revenue we are bringing inventories back to healthy levels and we can try to go on operations and cash second simplify we We are working towards a leaner organization, clear accountability, a smaller and better product portfolio and faster decisions. And thirdly, on focus, there will be fewer priorities and resources go to the segments where we can win. We will focus on the needs to have before the nice to have. These three moves will lead to one ambition, which is for peripherals to reach break even at around 85 million revenue and around 44 percent gross margin. If you go to the next slide you will see that when I started we did a full review and this slide shows what we said what we would do and what has changed so far. On the stabilized part, our operating expenses are lower versus the first half of last year. The gross margin improved materially compared to last year and the channel normalization is underway. On Simplify, we have the new management board structure in place and the responsibilities between Urien and myself are implemented. A new leadership team for peripherals is installed and we kicked off the product review to further simplify our operations. On Focus, Project Blossom is launched where we focus on four growth initiatives and a cost-saving program and one of these growth initiatives is our security and industry business. And for digital health we are well on track to deliver ambition for the full year. Two points on the next slide. First, my appointment as CEO was confirmed effective July 1st after my interim project. This gives continuity and stability while we execute to turn around. Second, Jørgen and I both participated in the rights issue. We acquired new shares and we both oversubscribed, showing our confidence in the direction of the company and the long-term value we can create. With this, I hand over to Jørgen for the financials.

Yeah, thanks a lot, Rogier, and all of you. A good day. Before we dive a little bit deeper into the financials, a couple of remarks on today's presentation first the final half one numbers will be released after the completion of the 2025 audit and i will come back on this later second our discussion today focuses on operational segments in their current structure to provide the best basis for comparison for completeness sake however we will show the so-called discontinued operations pnl in this presentation as per the IFRS requirements. Thirdly, the presentation covers the first half performance where detailed Q2 figures will be made available in the appendix of the presentation, and we will publish that online after a call. Lastly, but equally important, it's to highlight that in this presentation, we focus on our operational performance excluding active keys that were sold to Contour last year. So let me turn to this discontinued operations P&L on the next slide. While revenues continue to reflect a challenging market environment, especially in Europe, we achieved a significant improvement in profitability. Gross margin increased from 43% to 37% in the prior year period, and yesterday EBITDA loss improved to minus 4 million from minus 10 million last year. This was mainly the result of our structurally lower cost base and an improved margin, as well as a positive earnings contribution from the H&S. At the same time, we further reduced working capital, demonstrating our continued focus on cash generation and balance sheet dissipating. Our cash balance at the end of June was 4.3 million euro, which was further boosted in the month of July on the back of the recently completed capital increase. so let me now take you through our first half 2026 performance and as i said this um you know the structure of the presentation basically represents uh the structure of the segments as you know it comparable first half 2026 group revenue came in at 40 million euros approximately three percent above the first half of 2025 with 39 million on a comparable basis When discussing the year-on-year development, it's important to know that this comparison is affected by several extraordinary effects in the first half of 2025. And these may relate to the one-off Argon inventory transaction that we did in November of last year. In the first half of 2025, we sold approximately 6 million euros worth of STUs. that in 2026 we also sold but then on behalf of argant and hence these revenues were recognized as revenue by argant and not by cherry in addition there were adverse foreign exchange effects of around half a million excluding these items the underlying peripherals business proved resilient with revenues declining by three percent despite continued challenging market environment Looking at the individual businesses, CDH continued its strong momentum, delivering a revenue growth of 36% year-on-year, while the components business continued to face a difficult market environment and recorded it through the decline. Moving on to the next slide, I will dive a little bit deeper in the quality of these earnings. Turning to profitability. We delivered a significant improvement in adjusted EBITDA despite the fact that revenues fell short of the same period last year. Adjusted EBITDA improved to minus 4 million in the first half of 2026 compared with minus 10.2 million in the prior year period. this was primarily driven by disciplined cost management and strong margin execution at the group level we reduced costs by around 10 million year on year while gross margin improved by 12 percentage points both the peripherals business and dhns made a meaningful contribution to this improvement although gross margins in the component segment have also significantly improved top lining components remains weak you will find that central costs remain relatively stable year on year which is where a big part of the blossom efforts are focused on now moving to adjusted EBITDA i've mentioned before that it's important to me and to us that we're transparent as to how and by how much we adjust EBITDA to get to adjusted EBITDA as you can see on this slide we adjusted for non-recurring gross margin effects to the tune of almost a million euros this particularly relates to lower margins related to selling off slow moving inventories and restructuring costs in the manufacturing area adjustments in operational expenses mainly related transaction costs related to the divestment of dhns as you know we have a thriving dhns business and our difficulties largely relate to the components and peripheral segment of charity so let's dive a little deeper into developments of these segments from a gross margin and from a cost point of view. We've been quite focal about the fact that we believe that the entitlement margin level for our combined peripherals business lies around 44%. This relates to sales minus material costs. Year on year, we improve this on an adjusted basis from 41.7 to 45.1%. This entirely relates to more focus on margin management and a better product mix. Second, as I will further elaborate on when talking about costs, our so-called gross margin 2 saw an increase of 12.5 percentage points to 29%. This basically relates to substantially reducing our manufacturing base. We still believe that 29% is not good enough, but the improvement is promising. thirdly we must make sure that our cost base comes down you see this on the right hand side where i show that costs have come down from 17 and a half million in h1 2025 to 10.8 million in h1 2026 predominantly driven by lower manufacturing costs and lower selling expenses we've also said that this is not the end of our cost reduction efforts and in project blossom we plan to take out even more costs let me end this financial section with an update on the key topics on the next slide first of all let me update you on the status of the 2025 audit and our recent financing activities the audit is well advanced and the majority of audit procedures have already been completed however as you can imagine the anticipated divestment of the hns will have a material impact on the remaining cherry business in terms of size in terms of planning and outlook and in terms of financing and all of these aspects have to be evaluated by the auditor consequently the audit cannot be completed until there is more clarity on the outcome of the divestment on the financing side we successfully completed our rights issue the capital increase comprised up to 9.7 million new shares and was subscribed almost in full. Only 877 shares remained unsubscribed and these were subsequently acquired by members of the management team. Gross proceeds amounted to approximately 10.1 million euros and further strengthened the company's financial position. Finally, let me briefly update you on the planned sale of our digital health and solutions business we have received a number of non-binding offers which are currently being evaluated and this pro as this process is ongoing we're not in a position to now provide further details at this stage but obviously we'll do so as soon as something new is worthwhile mentioning with that let me hand back over to rogier for an operational update Thanks Jørgen, thank you.

Let me start with our peripheral business and where we currently stand. Over the first half year, our priorities have been very clear. Restoring profitability, normalizing the channel inventory, which in this case is Europe only, and sharpen our go-to-market approach. First, we achieved a meaningful recovery in gross margin as already mentioned by Urien. This reflects the benefits of our disciplined cost management, a more focused product portfolio and improved pricing quality. At the same time, we continue to normalize the channel inventories. We are working closely with our distribution partners to bring inventory levels back to a healthy position over the course of the year, creating the basis for more sustainable sell-through. We have also further refined our commercial approach. Rather than going after broad market coverage, we are concentrating on selected full-service partners and prioritizing product market combinations where we see the strongest opportunities. This reduces operational complexity, lowers inventory risks and improves capital efficiency regionally our part is different in Europe the focus is on accelerating sell through completing the channel cleanup and launching targeted b2b growth initiatives in the u.s. we are redesigning the commercial model reducing number of skews and further optimizing our route to market together with our recent network in In China market conditions remain challenging following the phase out of governmental support for consumer electronics and here our priority is to continue adapting the portfolio to the current demand environment. Let me now turn to digital health and solutions. This business operates in a highly regulated market with high entry barriers giving strong visibility and attractive long term growth. The main driver is Germany's telematic infrastructure rollout. Around 150,000 institutions are still to be connected by 2027, which gives a predictable demand. Our certified secure platform already handles secure messaging and sensitive health data with room to expand into further compatible services. We also see a clear path to growing our recurring revenue. We are well positioned to move from hardware-led sales to SaaS subscriptions and our install base and terminals support cross-selling additional software over time. In short, the regularly detailed winds, the growing install base and rising recurring revenue gives this business a clear, sustainable growth path. On Project Blossom, let me summarize again the key operational priorities under this the program is built around five focused initiatives that are designed to accelerate profitable growth while further improving operational efficiency the first priority is to strengthen our position in China by accelerating growth growth growth in those market segments where we see attractive opportunities by further aligning our portfolio with local demand in parallel we are redesigning our commercial model in the US to simplify our route to market improve execution and increase commercial effectiveness the third focus area is expanding our presence in our home country in the dark region we see attractive growth opportunities in both existing personal relationships new market segments supported by a more targeted go-to-market we're also investing in our position in security and industry segment where we aim to further strengthen our market vision with a differentiated product offering and deepen customer relationships. And finally, all of these initiatives are supported by a continuous focus on efficiency and effectiveness. We remain committed to simplify processes, reducing complexity and allocating resources to areas where the highest value creation is possible. All combined, these initiatives form a clear operational roadmap to improve execution, strengthen our market position, and support sustainable, profitable growth over the coming On the next slide, you see the key priorities for the Cherry Group. As you can see from this slide, we have four key priorities. We have successfully completed the capital raise, which gives us the bandwidth to implement Project Blossom. As mentioned before by Eurion, the sales of digital health is well underway and several non-binding offers are under review. With the proceeds from digital health, we will repay debts and strengthen our balance sheet. And last but not least, the execution of Project Blossom will bring us back to growth and a reduced cost base. And we are pleased to share that we are well underway with all these priorities. let me finalize with a management summary four messages to take away one is we are consolidating the plan the cost base will be aligned to revenue and gross margin is materially up two we have a clear strategy stabilize simplify and focus with one transformation project program which is called project awesome three we have a clear ambition peripherals are break-even at around 85 million revenue and around 44% gross margin. And four is the disciplined execution. Fewer priorities, clear accountability and a strong focus on cash and working capital. I will now hand over to Ingmar for the Q&A.

Thank you, Rogier. Thank you very much for the presentation and we will now move on to the Q&A session.

For a dynamic conversation, we kindly ask you to ask questions in person via audio line to do so click on the raise your hand button and we already have participants with a raised hand Bastian Brach you should be able to unmute yourself switch on the microphone and ask your question please hi some questions for me the first one is on the gop segment which seems like you stabilized it a decent amount with only a three percent decrease on an investor basis had a few words about that to um explain what like the most important changes were you made um on that business was it more like an inventory was it more like your partner selection um and on on top of that uh what it needed to grow the business and increase margins further mutual 27 target so for me so for me uh bastian the question was not entirely clear you broke up a little bit i think your question related to um you know the peripherals business and how

the margin increase came about whether it was on the back of partner selection distribution channels product mix and and things like that is that is that correct yeah it was on margin and on the growth so only um three percent decrease on an adjusted level it seems like you stabilized it quite a bit um what um yeah what measures you took there um as well yeah so let me let me do um one part of the uh equation uh and then i hand over to rogier uh for uh the the let's say, more commercial aspects of market improvements. I think one of the major drivers outside of our decision to limit distribution to specific distribution partners is the fact that, as you know, in the course of 2025, a restructuring plan under S6 was agreed to with the banks And that basically pushed a fairly steep reorganization and restructuring of the manufacturing environment. And that obviously specifically relates to peripherals and components. And this is, you know, from a cost point of view, one of the elements that boosted margins. And then I think on the commercial side, and I'll turn to Ophira in a bit, but we're just much more stringent on what deals to pursue. and what deals not to pursue, but Gofi can elaborate on that.

Yeah, yeah, yeah, indeed, Bastian, sorry, I could not reply immediately because you were breaking up a little bit. On the margin improvement, so what we see is it's actually across the three regions, both China, Europe and the US, we see margin improvement versus last year. in the U.S. related to what I shared earlier is the changed operating model where we decided to focus on fewer accounts but do them better and also to optimize for example promotional spend So to make sure that we return on the investments that we do, meaning sometimes less is more in this case. So investing more promotional spend is not always leading to better results. So it's a mix across the countries, across the regions. In Europe, it is, as mentioned as well, is more focused on, say, which customers to work with, which products we want to sell, but also a first step into improved pricing quality in the pricing model and pricing structure that we are kicking off. And you see that these effects are kicking in. So, you know, it's early days, but we see that the operational margin indeed is improving versus last year, given the input and efforts that they've put in.

Okay, thank you. Maybe a little outlook on H2. Do you think you can grow the peripherals business in H2 again on an adjusted basis? Or is that too early?

Yeah, it's a little bit too early to say. One point which I raised is that we have still some challenging channel inventories in Europe, which will slow down sell-in. so there we need to accelerate sell out or sell through to to get to healthy levels so it's a bit early to say for us important this year is that we are also preparing the company to get to the level where we said we would be next year which is the stabilized 44 gross margin or the minimum of 44 gross margin so we in 2026 we are working towards that plan for 2027.

Okay, perfect. Thank you. My last question is on the components business, which, yeah, is still in a challenging situation. Would you expect the business to wind down in the future?

Or what kind of prospects do you see here? yeah we're we're looking we're looking at that as we speak um so yes it is challenging um and yes we're looking at all opportunities and we're looking at all models to make the best decision for the company going forward so it's on the review um and it and to your point it is indeed it is a slightly more challenging market than a peripheral business okay thank you very much for taking my questions you're welcome thank you mr brach for your questions and we move on

to the next participant oliver fry mr fry you should be able to unmute yourself switch on the microphone toggle and ask your question mr fry you should be able to unmute yourself i hope you can hear me now yes we perfect uh sorry thanks for taking my question uh maybe on top line again uh the inventory or channel normalization has been going on for quite a long time uh is there maybe any end inside maybe some hope that sales are going to increase soon maybe this

for the beginning uh yeah well um just hopefully it's a bit more than hope um what we're what we're working against is that we are trying to normalize it in the course of this year. Also here, what I mentioned as an answer to the question of Bastian is that we're preparing the company, the Prifols company, to be ready for 2027.

So the aim is to reduce general infantry significantly in the course of this year, where we anticipate to be significantly below what we currently have at the start of 2027 perfect and the second question on cost control we have seen good progress here in recent quarters any bigger initiatives that maybe puts pressure on costs or cash plan for 2026 now for 2026 I mean there's a couple of elements in terms of cost and we have outlined already um that uh in project project blossom we plan to take out more costs um

you know some of these expenses and costs are discretionary in in nature and what i mean with that is you know you you take a decision to take to no longer do certain things so it doesn't cost an investment to get rid of these costs when it comes to people when it comes to size of the organization you know obviously we also have to make sure that you know people get a fair severance package and this needs to be catered for and this needs to be properly planned in view of the available cash that we have in hand perfect and then maybe one last on liquidity if I counted correctly you have collected around 15 million via the capital increase and then some commitments from Argand in May I think can you give us an update on cash generation or cash burn where you currently stand yeah so so the I mean I have to unfortunately correct you a little bit that because the the the liquidity comfort that argon provided you know is subsequently diminished with the money that argon factually invested in the capital increase so the net liquidity improvement is not 15 million but this gross proceeds of 10.1 million that was also listed in the presentation so that is one uh aspect um i think rogi was quite vocal about you know the fourth the four things that need to happen when it comes to restoring our balance sheet and setting up the remaining business for success one obviously was and is that capital increase the second one is the divestment of dhns then we need to make sure that we um you know settle the outstanding bank debt and we have to execute on project blossom you know clearly with a with a divestment

of digital health and solutions the cash situation of the company remaining is negative which is why it is so urgent that we execute on project blossom to get to this ebit break-even situation in 2027 okay thank you just so i understand the number correctly so in may the announcement was made by argon to commit capital and then this committed capital was then seen during the increase so that's basically one announcement correct perfect thank you very much thank you very much mr frei and we move on to the next participant mr felix ellmann you should be able

to unmute yourself and toggle the microphone and then ask your question please so can you hear me now yes wonderful uh well the majority of my questions already have been posed um can you shed some more light on the question uh of the divestment whether this will be successful and i understand that you can do this only very limited but uh maybe you can share some kind of probability or how many parties you are talking to or that whether we can be sure that it's it'll be done in the next let's say quarter or two tell us what

you can okay let me let me try and be as transparent and explicit as possible you know like we said in the presentation we've received a number of offers. They're all non-binding in nature. Discussions with a number of interested parties are ongoing. There is definitely appetite and I think our decision to apply discontinued operations for the business should be fair indication enough that we believe it is more likely than not that the H&S will be divested. And I'm sorry, Felix, but there is not much more that I can say to that.

Okay, thank you.

Okay, so we move on to our next participant, Mr. Ramon Huber. Mr. Huber, you should be able to unmute yourself and switch on the microphone. Ask your question, please.

Mr. Huber, you are still muted. can switch on your microphone in the lower left corner sorry yes now you can hear me so can you give perhaps a little bit light on on 27 so how would you like to to get the turnover like it's more than double uh from from this year what what are the points you you think you can do that and especially with the good margin yeah so i it's not double um it's not double but we expect indeed double digit growth versus this year um one is that the normalized channel inventory

should support a high selling in 2027 so you see that with high channel inventories and this again as i outlined before this is europe only but with the higher inventory levels in europe we need to actually sell out more or we can sell out less than what we should sell out so selling is is expected to be high in 2027 even on the normalized operational basis once the general inventory is lower so that's one reason and and the other actually are the four initiatives that we shared in project blossom which is the new operating model in the us where we focus on fewer but bigger accounts in china which is predominantly around gaming you see that in china the majority of our business is done in in gaming keyboards so with the china team we're working on a more china for china portfolio which should support growth and we we there there is an opportunity for us to grow it is a it is a challenging market but the market shares that we have are still quite low so the opportunity for china to grow there as well and then for europe for now we focus on the dark region within the dark region specifically germany to grow our b2b business for office products and in the same kind of similar time frame we're also increasing our commercial capacity in both the uk and france where we hired some new people and fourth is the security and industry input device business as we called it where we see an opportunity for cherry with secured keyboards but also industrial keyboards to focus on firstly the German markets and secondly after approval success we expect to roll it out to France the UK and perhaps Benelux and Nordics but first France UK so the the channel inventory normalization combined with the four growth initiatives in in project blossom should lead to that growth and we have to grow because we cannot we cannot restructure to profitability so we need to take cost out which we committed to do and we're well on the way but the top line growth will come from the blossom initiatives and the general normalization I hope that clarifies.

And competition-wise, is there any new competition coming up?

For the peripheral business, I don't think so. I think the competition out there and the expected competition is the competition that we have seen for many years in a row. I don't expect that to change. change. Perhaps there will be some consolidation. We see that in gaming keyboards, there are more and more Chinese entries on the European market. But overall, you know, I think the market is pretty transparent and I don't expect too much change over there.

Okay, thank you very much and good luck.

Thank you, Ramon.

Yes, thank you, Mr. Huber, for your questions. In the meantime, we have received no further questions so to all the participants if you would like to hand over and ask a question to the management directly please feel free to raise your hand that's not the case by now and we therefore come to the end of today's earnings call thank you for joining listening and all the questions A big thank you also to the gentleman for the presentation and the time you took to answer the question. How is you all a lovely remaining week? And with this, I hand over again to Gorier for some final remarks.

Yeah, thanks, Ingmar. So, as already mentioned, thank you all for your time and your questions. A brief summary. We're moving. the company is is moving step by step into a slightly better direction I would say we see that the results of the first half year have improved versus first the first half year last year we have a concrete plan which project blossom we are well on the way there we have shared four priorities for the company the rights issue which we successfully completed the divestment of digital health you know restoring the working or improving our balance sheet and reducing our debts and then at last but not least is the execution of project blossom so we're well on the way there's still a lot to do but we feel positive about the future thank you so much for joining