Cherry SE publishes preliminary Q3 figures and updated forecast for fiscal year 2024

Munich, 24 October 2024 - Cherry SE today announces preliminary financial performance indicators for the third quarter and the first nine months of 2024. Key aspects of the recently updated forecast for the 2024 financial year are also explained. Both the high proportion of business in Germany and the structural problems in the Gaming & Office Peripherals division required the implementation of a new catalogue of measures and the revision of expectations for the second half of 2024. 

• Revenue at EUR 84.2 million in the first nine months of 2024, down 5% on the previous year's figure of EUR 88.6 million and below the company's own expectations
• At EUR 22.6 million, revenue in the third quarter of 2024 was17% below the comparable figure of EUR 27.3 million in the same quarter of the previous year
• Adjusted EBITDA margin of -0.8% after nine months (previous year: 2.2%) and -13.7% in the third quarter (previous year: -4.8%) due to lack of fixed cost coverage from the Gaming & Office Peripherals and Components divisions
• Management Board's top priority is to adjust the weak sales situation; launch of new distribution model in the fourth quarter 
• Management Board expects consolidated revenue of around EUR 120 million and an adjusted EBITDA margin of around 3% for the 2024 financial year

At EUR 84.2 million, Cherry SE's nine-month consolidated revenue fell short of expectations and was also 5% below the previous year's figure of EUR 88.6 million.  Consolidated revenue of just EUR 22.6 million in the third quarter was 17% below the comparable figure of EUR 27.3 million in the same quarter of the previous year and below the company's own expectations of around EUR 35 million. In addition to the negative impact of the weak notebook market in the Components division, the main reasons for the forecast shortfall are the recessionary trends in the home market of Germany and the structural weakness in the Gaming & Office Peripherals division. In both the B2B and B2C segments, CHERRY registered a significant reluctance to purchase peripherals, based on a decline in general investment and spending, particularly among German companies, as well as an increased savings rate among private households. In contrast, the Digital Health & Solutions division performed extremely well and saw a significant increase in sales compared to the previous year. 

In the first three and nine months of 2024, Cherry SE recorded an adjusted EBITDA margin of -13.7% (previous year: -4.8%; planned: 5% to 6%) and -0.8% (previous year: 2.2%) respectively. The Gaming & Office Peripherals division in particular contributed to the slump in earnings in the third quarter and delivered a negative earnings contribution of EUR -1.5 million (previous year: adjusted EBITDA of EUR 5.2 million). The lower fixed cost coverage due to the sales drop pushed the segment into the red. Earnings in the Components segment also fell slightly short of Q3 2023’s result. While the Digital Health & Solutions segment was still in the red in the same quarter of the previous year, it generated an earnings contribution of over EUR 2 million in the third quarter of 2024. 

CHERRY is currently implementing a comprehensive action plan. This includes the restructuring of the GOP division in terms of personnel, organization and structure, the synchronization of our sales channels and the introduction of a relationship scorecard. These steps support a reorganization of our cooperation with distributors, including a new pricing and margin model. The course we have taken is seen as a crucial building block for a sustainable and successful future for the company. Despite the deviations from the original targets, the Management Board of Cherry SE is optimistic about the future and is convinced that these strategic adjustments will enable the company to achieve profitable growth again.

Oliver Kaltner, CEO of Cherry SE, explains: “The realignment of our business model with the distributors in the Gaming & Office Peripherals division is crucial in order to significantly reduce the trade margin. This is not only of central importance for increasing our profitability, but also for the efficiency of our entire business processes. More specifically, the realignment means a focus on the sell-out business and a new pricing and margin model that is designed to optimize the value chain in its entirety. This will create a solid foundation for sustainable and shared growth, not only for our company, but also for our partners. These adjustments in Europe also go hand in hand with the reorganization of the sales channels for APAC, which is already underway. We are streamlining the cost block with two new partners and direct management of the e-commerce business. Part of the reorganization are targeted point-of-sales measures that we are aligning specifically for the Asian region. The reorganization is already bearing fruit, and we are seeing CHERRY becoming more competitive in the APAC region.”

Cherry SE updated its forecast for the 2024 financial year in an ad hoc announcement on 22 October 2024. The company now expects consolidated revenue of around EUR 120 million (previously EUR 140 to 150 million) and an adjusted EBITDA margin of around 3% (previously: 7% to 8%). Based on the preliminary sales and earnings figures for the third quarter, the new forecast for the current fourth and traditionally seasonally strongest quarter implies Group sales of around EUR 35.9 million (previous year: EUR 37.9 million) and an adjusted EBITDA margin of around 11%. The new forecast is based on the assumption that Cherry SE fully implements the cost-cutting program it launched in September. According to this program, cost savings of around EUR 3.5 million are to be achieved by the end of the year, particularly in the areas of marketing, external services, IT projects and workshops. The company has currently put vacant positions that are not immediately necessary for operations on hold. 

Cherry SE provides further preliminary data on the nine-month period and the third quarter at https://ir.cherry.de/en/home/publications/.

The company will publish its report on the nine-month period and third quarter on 6 November 2024 at https://ir.cherry.de/en/home/publications/#interim-reports.

About Cherry SE

Cherry SE [ISIN: DE000A3CRRN9] is a global manufacturer of high-end switches for mechanical keyboards and computer input devices such as keyboards, mice, and headsets for applications in the fields of Gaming & E-Sports, Office & Hybrid Workplaces, Industry, and Healthcare. Since its founding in 1953, Cherry has been known for innovative, high-quality products specifically designed to meet diverse customer needs.

Cherry’s operational headquarters is in Auerbach in der Oberpfalz (Bavaria) and it employs staff in production facilities in Auerbach, Zhuhai (China), and Vienna (Austria), as well as several sales offices in Auerbach, Pegnitz, Munich, Landskrona (Sweden), Paris, Kenosha (USA), Taipei, and Hong Kong.

For more information, visit:https://ir.cherry.de/en/

Contact

Cherry SE

Nicole Schillinger

Investor Relations

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

T: +49 (0) 9643 2061 848

E: ir@cherry.de