Cherry SE misses revenue forecast for the third quarter of 2024 due to weak German market

Munich, 2 October 2024 - Cherry SE announces that it will not achieve its revenue target in the third quarter due to the recessionary trends in its home market of Germany. The company will comment on the consolidated result for the third quarter and the achievability of the forecast for the year as a whole as soon as possible.

• Revenue forecast of around EUR 35 million not achieved in the third quarter, company currently anticipates quarterly revenue of around EUR 22 million
• Current downturn in economic activity and negative consumer sentiment in Germany has slowed commercial and consumer purchasing including in the Office Peripherals segment; international markets are performing better
• Negative margin impact of the lower group revenue expected to drag adjusted EBITDA for the third quarter into negative territory
• Additional cost reductions of EUR 3.5 million with immediate impact on earnings initiated
• Digital Healthcare & Solutions revenue expected up strongly y-o-y
• Adjustment of the forecast for the entire 2024 financial year is currently being reviewed

Cherry SE expects a revenue level of around EUR 22 million in the third quarter of 2024 based on current evaluations and prior to the completion of its quarterly financial statements, falling short of the forecast revenue level of EUR 35 million. To meet the revenue target, the company would have had to bow to the price pressure in the German market and sacrifice margin in a way that is not consistent with our mid-term path of successively accelerating margin improvement for CHERRY and its partners. The reasons for the revenue deviation lie in the clearly negative economic trend and the recessionary growth prospects in Germany. In both the B2B and B2C sectors, CHERRY is seeing a notable reluctance to buy peripheral devices, based on a decline in general corporate investment and spending as well as an increased savings rate among private households. In contrast, the Digital Health & Solutions division is well above the same quarter of the previous year. Cherry SE will provide a definitive earnings statement for the third quarter in due course. However, the company is immediately tightening its strict cost management.

At this stage, the Management Board assumes that the lower Group revenue will have a negative impact on the adjusted EBITDA margin for the third quarter and therefore for the full financial year due to lower fixed cost coverage, the details of which are still being evaluated.

Based on the adjusted EBITDA margin of 4% achieved in the first half of the year and the results of the third quarter, the company is currently calculating the forecast for the fourth quarter to determine the figures to be announced for revenue and adjusted EBITDA margin for the year as a whole. In view of the significant uncertainties and the rapidly worsening recession in the German domestic market, the company will comment on the 2024 forecast as soon as a reliable assessment is possible.

Oliver Kaltner, CEO of Cherry SE: “The increasing number of negative reports from major German corporations also require a look at the tense situation in German SMEs. The GfK consumer climate index in Germany deteriorated further in September to -22 points, and leading economic research institutes are forecasting a contraction in German GDP for the current year. Cherry SE is positioned internationally, but Germany is our important domestic market, and the weak consumer demand combined with a lack of economic growth prospects is therefore also affecting us significantly. The company continues to prioritize profitable growth rather than revenues at all costs. For us entrepreneurs, we need an immediate reduction in bureaucracy and comprehensive deregulation. We can no longer afford any further burdens, such as supply chain laws or reporting obligations. These are critical factors in planning the geographic allocation of resources for growth. Consumers in Germany need orientation, perspective and, finally, confidence again.”

Volker Christ, EVP Global Finance & IT, adds: “Due to the current challenges in the Gaming & Office Peripherals segment, we have launched a further cost-cutting program with immediate effect, with which we aim to generate at least EUR 3.5 million in direct cash and earnings effects by the end of the year.”

The announcement of preliminary Group key figures for the third quarter of 2024 will take place on 24 October 2024 as planned. The full Q3 report will be published on the company's website at https://ir.cherry.de/home/publications/#interim-reports on 6 November.

About Cherry

Cherry SE [ISIN: DE000A3CRRN9] is a globally operating manufacturer of high-end mechanical keyboard switches and computer input devices such as keyboards, mice, and headsets for applications in the worlds of gaming, e-sports, office and hybrid workplaces, industry, and healthcare. Since it was founded in 1953, Cherry has been synonymous with innovative, high-quality products developed specifically to meet the various needs of its customers.

Cherry has its operational headquarters in Auerbach in Germany's Upper Palatinate region and operates production facilities in Auerbach, Zhuhai (China), and Vienna (Austria) as well as various sales offices in Auerbach, Pegnitz, Munich, Landskrona (Sweden), Paris, Kenosha (USA), Taipei, and Hong Kong.

Find out more: https://ir.cherry.de/

Contact

Cherry SE

Nicole Schillinger

Investor Relations

P: Rosental 7, c/o Mindspace, 80331 München

T: +49 (0) 9643 2061 848

E: ir@cherry.de