Cherry Se · XETR:C3RY
Cherry — Investor Day (April 2024)
59 slides from Cherry's investor day presentation, Apr 25, 2024
Slide 1: Welcome to Cherry's Analyst & Investor Day
WELCOME TO CHERRY‘S ANALYST & INVESTOR DAY 25 April 2024 1
Slide 2: Forward Looking Statements
FORWARD LOOKING STATEMENTS DISCLAIMER This presentation contains forward-looking statements. These statements are based on the current views, expectations and assumptions of the management of Cherry SE and involve known and unknown risks and uncertainties that could cause actual results, performance
Slide 3: Agenda
AGENDA 2:00 p.m. Welcome & Agenda, Head of IR Nicole Schillinger 2:05 p.m. Overview of the company's situation, CEO Oliver Kaltner 2:15 p.m. Presentation of selected 2023 financial data, Interim CFO Volker Christ 2:30 p.m. Presentation Q1, 2024, Interim CFO Volker Christ 2:35 p.m. Roadmap 2025: Stat
Slide 4: Executive Team in the Room for You Today
EXECUTIVE TEAM IN THE ROOM FOR YOU TODAY Oliver Kaltner Udo Streller CEO COO Experienced CEO with proven More than 20 years of track record in IT, digital, management experience in consumer electronics and operational excellence, including branded companies, both in constructing and managing factori
Slide 5: Cherry SE State of Play
Oliver Kaltner, CEO CHERRY SE STATE OF PLAY Cherry SE Analyst & Investor Day 5
Slide 6: Taking Final Steps to Close the Chapter of Overpromising & Underdelivery
TAKING FINAL STEPS TO CLOSE THE CHAPTER OF OVERPROMISING & UNDERDELIVERY Management taking action to turn around Prudent and conservative balance sheet Cherry adjustment 2023 marks Cherry‘s turn of time, from Impairment of approx. € 96m signalling our overpromising until 2023 to delivery from 20
Slide 7: A Challenging Financial Year, Countermeasures to Increase Performance
A CHALLENGING FINANCIAL YEAR Adj. EBITDA Cash & Revenues Adj. EBITDA margin equivalents € 126.5m € 2.1m 1.6% € 46.1m COUNTERMEASURES TO INCREASE PERFORMANCE MX 2 Multi-level Strict cost Optimization Brand Corporate Switch distribution and cash of financial relaunch culture partnerships management pr
Slide 8: In 2023 We Have Failed to Meet Our Own Standards
IN 2023 WE HAVE FAILED TO MEET OUR OWN STANDARDS Revenues: € 126.5m Adj. EBITDA: € 2.1m • Target Revenue of € 140m not met • Adj. EBITDA margin: 1.6% • GOP*: Demand growth in computer peripherals fell • Adj. EBITDA target of 10 % not met short of own expectations as customers reduced their • EBITDA
Slide 9: Countermeasures Initiated to Increase Financial Performance
COUNTERMEASURES INITIATED TO INCREASE FINANCIAL PERFORMANCE MX 2 Switch New Partners • FY 2023: Project North • Intense and strict cost and • Focus markets: DACH, France, UK, • FY 2024: Full implementation cash management to Netherlands, Spain, Americas, China • Cost savings: € >5,5m p.a. improve fi
Slide 10: Business Strategy – It's All About Execution & Relevance
BUSINESS STRATEGY – ITS ALL ABOUT EXECUTION & RELEVANCE 2024e revenues € 140m - € 150m EBITDA margin 7-8% Profitability driven by organic growth Strict cost management Restructuring program Cost and Liquidity Management Streamlined product portfolio Debt reduction & internal financing Focus on growt
Slide 11: Cherry SE Financial Results 2023
Volker Christ, Interim CFO CHERRY SE FINANCIAL RESULTS 2023 Cherry SE Analyst & Investor Day 11
Slide 12: Revenue in FY 2023: Decline vs. Prior Year and Forecast Miss
REVENUE IN FY 2023: DECLINE VS. PRIOR YEAR AND FORECAST MISS Full year revenue* Revenue development by quarter 140 132.5 40 37.9 126.5 34.5 120 35 33.0 32.9 32.6 32.1 - 4.5 % 28.7 + 9.7% 100 30 27.3 - 13% - 0.9% 25 - 15% 80 €m €m 20 60 15 40 10 20 5 0 0 FY 2022 FY 2023 Q1 2022 Q1 2023 Q2 2022 Q2 202
Slide 13: 2023 Adj. FY EBITDA of €2.1m Dragged by Mounting Component Losses
2023 ADJ. FY EBITDA OF € 2.1M AND 1.6% FY MARGIN DRAGGED BY MOUNTING COMPONENT LOSSES 5.0 13.8% 15% 4.0 10% 3.0 4.5 5% 2.0 €m 1.0 0.4% 0% 0.1 0.0 -4.6% -4.6% -1.3 -1.3 -5% -1.0 -2.0 -10% Q1 2023 Q2 2023 Q3 2023 Q4 2023 adj. EBITDA (lhs) adj. EBITDA margin (rhs) Prelim. EBITDA Cherry Group in 2023: €
Slide 14: Future Profit Allocation to Fund Growth Strategy
FUTURE PROFIT ALLOCATION TO FUND GROWTH STRATEGY Profit improvement to ensure the Group's ability to grow No new share buyback program / 4.6 % Treasury shares at Dec 31, 2023 No dividend payout Cherry SE Analyst & Investor Day 14
Slide 15: Financial Results Q1 2024
FINANCIAL RESULTS Q1 2024 Cherry SE Analyst & Investor Day 15
Slide 16: Q1 2024 Revenue of €30.3m Up 5.5% YoY
Q1 2024 REVENUE OF € 30.3 M IS UP +5.5 % YOY AND WELL ABOVE GUIDANCE AND CONSENSUS Q1 revenue vs. previous year, own forecast Revenue split by business units in € m and consensus in € m 30.3 28.7 1.7 + 5.5% yoy 4.1 8.0 4.5 30.3 29.0 28.7 20.6 28.3 20.1 Q1 2023 Q1 2024 Own Forecast Consensus Q1 2023
Slide 17: Adjusted EBITDA Margin Increased by 7.4 ppt. YoY in Q1 2024
ADJUSTED EBITDA MARGIN INCREASED BY 7.4 PPT. YOY IN Q1 2024 Q1 adj. EBITDA margin vs. Q1 adj. EBITDA* split by business unit in € m own forecast* and consensus Group: 0.8 + EUR 2.2m yoy 0.6 Group: -1.3 2.6 0.6 0.4 + 7.4ppt. 2.80% 2.6 2.2 1.30% 0.00% Q1 2023 Q1 2024 Own forecast Consenus -4.8 -4.5 -4
Slide 18: Active Cost Management Expected to Materialize in 2024
ACTIVE COST MANAGEMENT EXPECTED TO MATERIALIZE IN 2024 Cost cutting by category (ytd)* Cost Reduction Program 2024 Target in € m* 6.00 Restructuring benefits € 5.5m 5.00 SG&A € 4.6m Material savings / other € 3.1m 4.00 €m 3.00 Head Count Development FTE 2.00 FTE Avg. 2023 456 Initiated reduction 105
Slide 19: Improved Inventory Management
IMPROVED INVENTORY MANAGEMENT* 90 Inventory** 80 € 56m 70 €m as of Q1 24 60 50 40 Jan 23 Apr 23 Jul 23 Oct 23 Jan 24 Apr 24 Jul 24 Oct 24 Trade working capital** 80 70 € 72m 60 €m as of Q1 24 50 40 Q1 2023 Q2 2023 Q3 2023 Q4 2023 Q1 2024 Q2 2024 Q3 2024 Q4 2024 * Q4 2023 preliminary unaudited figure
Slide 20: Free Cash Flow Expected to Break-Even at End of Year
FREE CASH FLOW* EXPECTED TO BREAK-EVEN AT THE END OF THE YEAR Cumulative capex and free cash flow development 10 5 € 1m / -8m as of Q1 24 0 €m -5 -10 Free cash flow Capex -15 Q1 2024 Q2 2024 expectation Q3 2024 expectation Q4 2024 expectation * Q4 2023 preliminary unaudited figures, company forecast
Slide 21: Roadmap 2025: Status Report Implementation
Oliver Kaltner, CEO CHERRY SE ROADMAP 2025: STATUS REPORT IMPLEMENTATION Cherry SE Analyst & Investor Day 21
Slide 22: Steps to Revitalize Cherry SE
STEPS TO REVITALIZE CHERRY SE SWITCH BUSINESS PERIPHERALS FOR GAMING AND (HYBRID) OFFICE HEALTH & SECURITY Components Gaming and Office Peripherals Digital Health & Solutions Keyboard Switches / Notebook Switches Keyboards / Mice / Headsets / Microphones E-Health terminals / encryption & disinfectio
Slide 23: Streamlined Product Portfolio, Focus on Global Trends
STREAMLINED PRODUCT PORTFOLIO, FOCUS ON GLOBAL TRENDS Efficiency gain: from 1,500 to 500 product and component versions (SKUs) until 2027 Product cycle: • MX1 – 39 years • MX2 – 3 years • MX3 - 2025 Cherry SE Analyst & Investor Day 23
Slide 24: Cherry Group Holding Structure to Become Leaner
CHERRY GROUP HOLDING STRUCTURE TO BECOME LEANER Cherry SE Analyst & Investor Day 24
Slide 25: Experienced Leadership Team: Selected Cherry Leadership Profiles (I)
EXPERIENCED LEADERSHIP TEAM: SELECTED CHERRY LEADERSHIP PROFILES (I) René Schulz, MD Gaming & Office Peripherals Gerrit Schick, MD Digital Health & Solutions • Joined Cherry in 2022 • Joined Cherry in 2022 • 19 years in high-tech industry, leading strategic growth • 25+ years experience in Healthcar
Slide 26: Experienced Leadership Team: Selected Cherry Leadership Profiles (II)
EXPERIENCED LEADERSHIP TEAM: SELECTED CHERRY LEADERSHIP PROFILES (II) Josh Philipps, CEO and MD Cherry Americas, LLC Tanja Knahn, Head of Brand & Communication • Joined Cherry in 2024 • Joined Cherry in 1991 • 21 years in consumer electronics with computer and • 30+ years Marketing Communication and
Slide 27: Cost Reduction of €10-15m p.a. Driven by Restructuring and Overhead Savings
COST REDUCTION OF € 10-15M P.A. DRIVEN BY RESTRUCTURING AND OVERHEAD SAVINGS Cherry SE Analyst & Investor Day 27
Slide 28: Top Priority: Liquidity Management, Cash Flow Generation, and Cost Steering
TOP PRIORITY: LIQUIDITY MANAGEMENT, CASH FLOW GENERATION, AND COST STEERING Inventory reduction to drive net cash (schematic) SG&A costs to decline significantly 70 40% 60 35% 50 30% 40 30 25% €m 20 20% 10 15% 0 2023 2024e 2025e 2026e 10% -10 -20 5% -30 0% 2023 2024e 2025e 2026e Inventory Net Cash t
Slide 29: Update Business Divisions: Components
Oliver Kaltner, CEO CHERRY SE UPDATE BUSINESS DIVISIONS: COMPONENTS Cherry SE Analyst & Investor Day 29
Slide 30: Cherry's Portfolio Covers the Whole Range of Switches
CHERRY‘S PORTFOLIO COVERS THE WHOLE RANGE OF SWITCHES FOR MECHANICAL GAMING AND OFFICE KEYBOARDS MX Switch Series – the Gold Standard • Cherry has produced several billions of mechanical switches in total. • High-profile MX2 with gold-plated contacts sets the standard for gaming keyboards. Multipoin
Slide 31: Switches Volumes to Third Parties Expected to Recover Strongly
SWITCHES VOLUMES TO THIRD PARTIES EXPECTED TO RECOVER STRONGLY External shipments (in units) 140,000 • Production in D for switch families LP and ULP as 120,000 well as for all MX switches used in Cherry‘s own 100,000 keyboards • Assembly in China for partner product switches 80,000 • High degree of
Slide 32: Gaming & Office Peripherals
GAMING & OFFICE PERIPHERALS Cherry SE Analyst & Investor Day 32
Slide 33: Improved Resource Allocation in Focus Markets
IMPROVED RESOURCE ALLOCATION IN FOCUS MARKETS Cherry SE Analyst & Investor Day 33
Slide 34: Keyboard and Mouse Market to Reach USD 12.2bn by 2032
KEYBOARD AND MOUSE MARKET TO REACH USD 12.2BN BY 2032* Global keyboard and mouse market* Global USD 4.9bn keyboard market split** Europe 14 USD 1.0bn USD 12.2 others 12 USD 1.9bn 8% CAGR 10 8 USD bn USD 5.8 6 USA USD 0.8bn 4 2 0 2023 2032 China USD 1.2bn * Source: Dataintello ** Source: Statista 202
Slide 35: Gaming on Growth Path
GAMING ON GROWTH PATH Cherry SE Analyst & Investor Day 35
Slide 36: Promising Gaming Market Trends in Germany
PROMISING GAMING MARKET TRENDS IN GERMANY % of gamers who would buy tech brand from country In 2022, 38% of Germans played video games on personal computers at least weekly Most important brand attributes to gamers when buying tech Computer gamers play very frequently: 26% play at least 10 or more h
Slide 37: Expansion from China to Europe and the USA
EXPANSION FROM CHINA TO EUROPE AND THE USA Gaming keyboard sales in China (ths. units)** China is the world‘s largest market with USD c. 2585 2,700 300m in keyboard sales and 2% CAGR 24 -28*; 2,500 2351 2379 Cherry with 7% market share** 2,300 2,100 1979 1977.5 1929 2036 Strong competition from
Slide 38: Office Peripherals: Focus Markets
OFFICE PERIPHERALS: FOCUS MARKETS Cherry SE Analyst & Investor Day 38
Slide 39: Office Benefiting from Work-from-Anywhere and Upgrading Trends
OFFICE BENEFITING FROM WORK-FROM-ANYWHERE AND UPGRADING TRENDS OP share Post pandemic market recovery on track* (% yoy) 20 10 0 New distribution partners and retail Q1 21 Q2 21 Q3 21 Q4 21 Q1 22 Q2 22 Q3 22 Q4 22 Q1 23 Q2 23 Q3 23 Q4 23 listings -10 Stronger focus on core markets From push to
Slide 40: Significant Potential Through International Expansion
SIGNIFICANT POTENTIAL THROUGH INTERNATIONAL EXPANSION OP share OP share Favorable market conditions APAC market share potential 83% of US employees consider good Office segment still underpenetrated technology and important factor (vs. 76% Trend towards higher quality keyboards as globally)***
Slide 41: Digital Health & Solutions
DIGITAL HEALTH & SOLUTIONS Cherry SE Analyst & Investor Day 41
Slide 42: Significant Potential Through International Expansion
SIGNIFICANT POTENTIAL THROUGH INTERNATIONAL EXPANSION Protected E-Health Security Embedded Solutions Peripherals TMS market size market size market size market size E-Health Germany ~€ 40bn Europe ~€ 50m Europe ~ € 250m Europe ~ € 500m TI ~€ 400m North America ~$ 170m North America ~ $ 500m North Am
Slide 43: E-Health Driven by Product Innovation and Regulatory Decisions
E-HEALTH DRIVEN BY PRODUCT INNOVATION AND SERVICES INTRODUCTION ON A MICRO AND REGULATORY DECISIONS / GOVERNMENTAL BUDGETS ON A MACRO LEVEL E-Health Terminal • Gematik-certified* and NFC-capable • Cherry with >75% share of newly installed terminals in a duopolistic market • Late start due to delayed
Slide 44: Medical and Other Hygiene Solutions – US Opportunity
MEDICAL AND OTHER HYGIENE SOLUTIONS – US OPPORTUNITY Medical and Hygiene • Focus markets: DACH; UK, F, USA, Southern and Eastern Europe • Increasing demand in Europe, market share c. 20% • Opportunity in North American HC market: Medical keyboards and mice market at c. USD 225m by 2027 • First order
Slide 45: Security and Embedded Solutions
SECURITY AND EMBEDDED SOLUTIONS Security for authorities, corporates, and the Cherry Embedded Solutions military • Theobroma Systems – acquired in 2021 – fully vertically • >90% of revenues with card reader keyboard integrated and highly scalable Synergies with GOP and Hygiene/Protect • 3rd party bu
Slide 46: Break
BREAK Cherry SE Analyst & Investor Day 46
Slide 47: Transformation Update
Dr. Udo Streller, COO CHERRY SE TRANSFORMATION UPDATE Cherry SE Analyst & Investor Day 47
Slide 48: Operations – Team Structure
OPERATIONS – TEAM STRUCTURE COO Dr. Udo Streller SUPPLY CHAIN OPERATIONS OPERATIONS TECHNOLOGY & MANAGEMENT EUROPE ASIA ENGINEERING ESG & COMPLIANCE PURCHASING PRODUCT QUALITY & IMS SUPPLY CHAIN OPERATIONS OPERATIONAL EXCELLENCE LOGISTICS PROJECT MANAGEMENT * As of Jan. 1, 2024 Cherry SE Analyst & I
Slide 49: Operations at a Glance – ESG & Cost, Speed, Quality
OPERATIONS AT A GLANCE – ESG & COST, SPEED, QUALITY [A] For ESG incl. Compliance the strategy review and 2024 roadmap cycle was completed, the Non-Financial Report 2023 will be published timely. (B) For Cost, Speed & Quality the development of performance shows a stable & positive trend for all of C
Slide 50: Footprint 2024 (Project North)
FOOTPRINT 2024 (PROJECT „NORTH“) Phase 1 (06-11’23) Phase 2 (11’23) Phase 3 (12’23 – 09’24) Evaluation & decision Announcement & preparation Execution Footprint eval Investor info Nov’23 M1a: Subcon contract signed E12’23 Business case eval Employee info Nov’23 M1b: Interessenausgleich A
Slide 51: Footprint 2024 (Project North) – Status @ April'24
FOOTPRINT 2024 (PROJECT „NORTH“) – STATUS @ APRIL‘24 (A) Achievements − China Contract signed ahead of target (27.12.23), − 1st tool set in place ahead of target (29.1.24), production area / facilities in place − 1st set released for assembly production ahead of target (07.03.24) − 2nd tool set with
Slide 52: Operations at a Glance – Technology & Innovation
OPERATIONS AT A GLANCE – TECHNOLOGY & INNOVATION (C) For Technology / Innovation incl. Project Management − a revised Product development Process, KPI & reporting scheme is in place since end Jan’24 Kick-Off Completion rate: 80% Approval Completion rate: 100% SOP Bi-Annual Ideation Gate Gate Industr
Slide 53: Outlook
Oliver Kaltner, CEO CHERRY SE OUTLOOK Cherry SE Analyst & Investor Day 53
Slide 54: Outlook FY 2024: Topline Expected to Increase
OUTLOOK FY 2024: TOPLINE EXPECTED TO INCREASE BY MORE THAN 12% Company forecast on 2024 revenues: € 140m – 150m 150 145.0 145 140 135.0 135 + 12.3% yoy €m 130 126.5 + 6.3% yoy 125 120 115 FY 2023 Consensus CHERRY Forecast Midpoint Cherry SE Analyst & Investor Day 54
Slide 55: Outlook FY 2024: Profitability to Increase by 5.9ppt. YoY
OUTLOOK FY 2024: PROFITABILITY TO INCREASE BY 5.9PPT. YOY Forecast on 2024 adj. EBITDA margin 2024: 7-8% 8% 7.5% 7% 6.7% 6% 5% + 5.9ppt. yoy 4% + 4.7ppt. 3% yoy 2% 1.6% 1% 0% FY 2023 Consensus Cherry forecast midpoint EBITDA margin CHERRY SE Cherry SE Analyst & Investor Day 55
Slide 56: The Next Quarter: What We Aim for in Q2
THE NEXT QUARTER: WHAT WE AIM FOR IN Q2 Revenues Adj. EBITDA margin Q2 2024e: above previous year Q2 2024e: approx. 5% Q2 2023: € 32.6m Q2 2023: 13.8% GAMING & OFFICE PERIPHERALS • Q-o-q revenue increase indication for full Europe: Retail listings with major chains year margin uplift China: Building
Slide 57: Outlook FY 2024: Internal Planning Basis
OUTLOOK FY 2024: INTERNAL PLANNING BASIS • Positive sell-out allows budgeted sell-in into distribution channels • Increased market presence through new sales partnerships • Regulatory market opening for digitalization in the healthcare sector • Market growth for Gaming and hygienic peripherals in th
Slide 58: Q&A
Nicole Schillinger, CHERRY SE Q&A Cherry SE Analyst & Investor Day 58
Slide 59: IR Contact
IR CONTACT NICOLE SCHILLINGER SVP INVESTOR RELATIONS E-MAIL nicole.schillinger@cherry.de PHONE +49 9643 2061 848 WEB https://ir.cherry.de