Thank you very much. Good morning, everyone. Welcome to our trading update for the nine-month 2024. We have a big group today, so more than 120 people. That's what Franziska just told us. So that's great. Thank you for the high interest. We have the usual sharing of parts in this presentation. I will do the introduction, some highlights, then at the end, the financial details. Dimitar will talk about products, and there are a lot of interesting things that we shared already one week ago on our first German Capital Market Day, where we as well had a very high interest. We have a special setting today. Normally, we are sitting next to each other in Sofia. This time, it's a bit changed. Dimitar is in Munich.
I am in Sofia because there is a trade show where we show Shelly X products to a bigger audience and to the target group. That's why Dimitar has to be in Munich, but happy that he joins the call as well before he goes to the show and hopefully gets a lot of customers motivated to use the Shelly X solution in the future. I usually start with telling you that we are basically a smart home company, sorry, not a smart home company, of course. We are a software company. We are doing smart home products based on our software solutions. The only reason why we have as well very good hardware is when we started this, we did not find hardware that can serve the needs of our software. So we are coming from the software angle, having hardware products as well.
Why am I stressing this? It's easy to copy hardware. It's not so easy to copy software or almost impossible to copy all the things that we have built in our products, and why is Shelly an interesting case for investments? We are in a positive market. We talked a lot about that last week on our Capital Market Day. We have a recognized brand. Our technology is way ahead of what competition can offer. We have the right scale in the meantime, and that starts to grow. That gives us a lot of potential for getting economies of scale. We have upside potential with new ideas, software models working towards recurring revenues. We have strong financials. We have a strong management team, not only Dimitar and myself. We have a very strong group around us, and ESG, everyone is talking about that.
A couple of companies are a bit scared. We help them to fulfill their ESG goals, and ESG helps us as well to fulfill our goals because we have a lot of products that enable reporting and reducing energy consumption. So some of the highlights of the 9 months, we have sold now 18 million devices since we started and sold the first Shelly device in 2018, an impressive number, 8 million in the last 12 months. So you see that this is growing significantly month- over- month, and we expect to break through the 20 million line soon in the next couple of weeks or months. We have Shelly devices in 3.6 million households. That's usually an estimation because not every household is connected to our cloud or every device is connected to our cloud.
We have close to 1.7 million users of our cloud solution, and this grew by 570,000 in the last 12 months. All this shows the success of Shelly. Our revenue is growing way above the market, I have to say, in all regions. We received, and I always say that it's a bit complicated to get clear market numbers. We had a meeting with a very big customer yesterday who is usually having very good market numbers. They are talking about market growth in smart home that is around 10%. If you see our growth rate, as usual, we are outperforming the market, although the market is a little bit complicated, and we know that a lot of our competitors are complaining, suffering. We are continuing to grow. We have successfully enlarged our distribution channel number. I will come to this in a second with two, three very important moves.
We have launched around Light + Building in March this year. We have launched our installer finder, so a customer that is not able to install the devices himself. We now find already 710 or more than 710 installers on our website in different countries. This was growing by 240 in the last three months. So at the beginning, it was a bit tough and slow, but now it's really taking off. We will have about 1,000 for sure by the end of the year. In Q3 alone, we were present on six trade shows, mainly smaller ones in small countries in Europe and in Asia. We have a significant growth of addressable customer ownership with our cloud users. We have phased out a couple of older product generations. This has a slight effect on the EBIT, as you might have seen yesterday already, but not significant.
We have quite a complicated year because currently we are working on bringing the Generation 4 in 2025 to the market. We have to make the first preparations. We have just launched Generation 3. We still have Generation 2 in the market. We have some products from Generation 1 that we will move directly to Gen 4 in the next year. That's quite complex, and that generates a little bit of stress on some product generations, but we have successfully managed that so far. Our cash level, that's an important information, is on the level, on the same level or a little bit better than by the 30th of June this year. That's something that we promised that we work on that, and we started. Our SAP integration is nearly completed so that we will have a much easier life and much better reporting next year.
We launched a new Shelly website that shows some successful results, much better customer satisfaction. That is more around use cases to address as well customers that are new to the smart home environment. Now to the numbers. We grew in the first nine months of this year 47.2% to a revenue level of EUR 65 million . Once again, information that we get from the market, the market is growing like 10%. Let's be optimistic and say the market is growing 15%. Then we outperformed the market 3x , maybe even 4x in this year. So that's quite impressive. The EBIT grew a bit underproportionally with 29.2% to EUR 15.4 million . We have an EBIT margin in the nine months of 23.6%, which is still perfectly on track to the 25% midterm target that we are promising.
As I said, there were a couple of one-time effects that will not come back every quarter, and we are 100% sure that we will reach the 25% in the 12-month period. Our cash is on a level of EUR 11.4 million at the end of September, which is EUR 900,000 better than it has been on the 30th of June, which is 37% below the level of one year ago. You will see later in more details where the money is going. It goes 100% in working capital, more or less 100% in working capital, where we have some significant increasement of stock. We are very well prepared for Black Friday and for a successful Christmas season. We are growing our number of distributors in the do-it-yourself side, mainly in the professional side. I want to highlight here two new onboarded distributors.
One is Ahlsell in Sweden, Norway, Finland, Denmark. It's the biggest electric wholesaler in the Nordics region, market leader by far in Sweden. Sweden is a market that is important for us, where we have a big competitor, and we have signed a contract with them for all Nordics. We'll start now in Sweden, and NetXL is a company from the United Kingdom. U.K. is one of our key markets for 2025, 2026. We have some very successful meetings with them. They are very much committed to Shelly products, to the Shelly development. We see some first very good results, growth month- over- month. That looks very promising and opens new doors to the biggest market for smart home products in Europe. A couple of words to the installer finder. I mentioned that we changed the layout a little bit.
If you have been previously on our website, you saw maybe the old one. Now we have to go in regions so that you see how many installers we have online in a region. Then you click on it, then you see how many is this in my city. If you type in your postal code, you see who's closest to you and what level of qualification do they already have, and after starting in Germany, we have rolled out to Austria, Switzerland, Denmark with a very good success, Finland, Sweden, only two, and Luxembourg two. We have even one. I didn't know that we have one on Palma de Mallorca, maybe because there are some of you guys having houses there, or maybe it's because our chairman lives there from time to time.
We have one installer onboarded on Mallorca for the, I think, for the German community, quite a useful thing. That's the introduction. Now, Dimitar, a couple of words about what's new on the product side and what makes us special on the product side.
Okay. And thank you, Wolfgang. Good morning from Munich. I want to share some information of the exhibition here. It's incredible interest to our booth. Even the booth is not so big, is not so, let's say, interesting. There are lots of visitors, and everybody knows about the Shelly. Everybody's showing his phone with application and see, see, I'm using the Shelly in my house. For us, this is a very important sign because this is a professional exhibition. Electronica is for the professionals which are doing the electronics, any kind of the electronic components and wiring and everything, which is related not only for the smart home, but for the industry, electronic industry itself. And you are very surprised that at the moment, almost everybody knows about the Shelly, and everybody is interested in participating and working with us.
Some reasons in these slides. I can start with that it's very important that we are one of the brands which are providing end-to-end solutions. There is not just the heating control, not just the lighting control, which many other competitors do that. We are everywhere. And with our devices, we can automate every single corner and every single appliances in the houses, something which gives the customers just with single choice, single brand to make their buildings and homes smarter. And not only this one, because the mindset of the company, how we build it and open the API, open the access to our devices to third parties, we are one of the brands which is covered from many, many other platforms. At the moment, I think it's close to 400 different platforms supporting the Shelly devices.
The partnership now is the much bigger and popular name in the world. As you see that in Porsche, Audi, or Harman Kardon, on top of the standard one, which is Amazon Alexa and Google, which our devices support them, and they can work with them. But there are many partners, and I can say that every month we have at least 10 to 15 more companies which are interested in using and integrating our devices as part of their own solution. And because of this one and everything, we've seen that the Shelly X reached a significant interest for the appliance manufacturers because they know that the appliances with the built-in Shelly devices, Shelly module inside could reach such a huge number of the integration and could be part of this ecosystem which we built the last few years. Yeah.
Something which makes us completely different from any other brands is that this is from the very beginning, the community-driven products. And community, I can say that this is the community-driven company because we are very close to our community. Some information which I want to share, just two weeks ago, we acquired the biggest German forum for the Shelly products. And basically, this is the biggest one for IoT products in Germany. And now we have an additional reach for 100,000 customers, which is our customers, but they're also using some other solutions. Like that, especially for the DACH region, we can cover them with the special localized support to help them to improve their skills. This is something which is not in the presentation because it's not a part of the Q3. But anyhow, at the moment, the Shelly brand is covered on social media very well.
There is a, I think, maybe we reached 10,000 videos in YouTube from our customers where they're sharing their experience and they're sharing their knowledge how our devices can be integrated to almost every need in one smart home and building. When we have a huge reach, as you can see, this is when we make a post or when we release a new product, there's over 1 million people see it in a very short time, which is very important. Everything is viral. We don't spend additional money to present the products because this is coming month to month between the community and people which start sharing immediately their opinion and start sharing and showing how they can use the devices.
On top of that, for our customers, for everything which we don't want to implement because we don't want to make complications for the regular customers deeper, we have this user-driven scripting. And now we're very popular between the developers, not only do-it-yourself and electricians, but also developers because they're using our devices and they make additional programming and developing on top of our software, which gives the device additional features, specialized features, for example, special kind of the TV control, special kind of the other appliances control, features which are not for everybody, but for very specialized, including industry users, it is important that they could have it. And something together with that, we are accelerating the number of the products which we have released. At the moment, as you've seen this year, compared with the other tools, we are going with the biggest numbers.
A big part of the product is ready to be in mass production, but the first official release of this product will be at CES beginning of January in Las Vegas. Yeah, the team, the R&D team is growing. We are accelerating more and more the new products and the ranges and updating the products with the newest technology. We believe from the very beginning that the innovations and the thinking about the future is much important, and this drives our success in the business which we are doing. Very short in the history, and there we leak a little bit more about the future. Now we're in the Generation 3.
From the very beginning, we start with the, let's say, compare with now with the limited feature that the devices could be used only the Wi-Fi connection and MQTT protocol to connect to the third parties and also using the WebSocket to our cloud. Then in Generation 2, we're adding the Bluetooth technology to all of the Shelly devices, and they can be able to control to using the Bluetooth sensors, and they communicate to each other between the Bluetooth. They can be provisioned over the Bluetooth, which gives additional functionality for devices. Now we're going to Gen 3, and these devices on top of everything which we do, now we have a Z-Wave also line. We're supporting KNXnet. We have a first device which is directly competing the DALI competitors, the manufacturers, because we're offering the solution for the lighting, especially for the lighting using the DALI protocol.
The KNXnet, which is the most popular protocol in, let's say, in Europe, I can say not only in Europe, but also in the world. For automation, our device can be part of the KNXnet system. The Matter is there for the customers which don't want to bother with all kinds of this technology, just want to connect these devices and plug and play to start controlling them. There is a Matter, and all Gen 3 devices are supporting or on the way because under certification to support the Matter, which with this one, our range is from direct work customers which don't so much tech-savvy, but want to use the devices and to make his life easier to the very deep professional which is looking for everything including industry usage for our devices. What next when we reach the Gen 3? We start with that.
We are also working with the Gen 4. As you've seen, the Gen 4, the main reason for the Gen 4 and the main approach for the Gen 4 is to integrate into devices Matter, Zigbee, and Z-Wave long-range technology. This is very important for us because like this, if at the moment you are very strong in the smart home and smart buildings, now we're looking for the smart cities. We're working for the smart factories. We're working for the real industrial automation using these protocols. Some of them allow devices to communicate between each other in 5 km . In our test, we make a chain of the devices, and the measure device which can communicate between over 100 km. Something which really extends the devices in many other areas, including agriculture, for example, and others where the coverage is not so good.
This is some of our targets for the Gen 4, which we're planning to be released in the next year. Yeah, I think this is something which at the moment nobody does that. Now back to Wolfgang to share with you some financial details.
Yeah, thank you. So the future looks bright. At the very beginning, you said one of our strengths is that we are ahead of competition with our features. That is coming mainly from software development. We have the right hardware for that. And with everything that we have in the pipeline for 2025 and 2026, we are sure that we will increase the advantage that we have to competition and not let it shrink so that they catch up because they see what we are doing. We are well ahead. And we do this in a typical Shelly way at reasonable prices with a very high quality. So that gives a very positive outlook for 2025 and as well for 2026. So coming back to the numbers, you have seen this chart before.
Just as a reminder, revenue growing 47%, EBIT around about 30%, a little bit underproportional, but still on 23.6% EBIT margin, which is an outstanding level in the industry, and the cash is on a solid level as well. That is something that is very important for us as well. If we look to the bit more detailed revenue development quarter- over- quarter, you see a similar picture. So in the Q1s, 2022 to 2024, we had a CAGR of 53%. Of course, always with some ups and downs between the different quarters. In the Q2s, we grew in average 49.3%, and in the Q3s, 43.3%. And Q3 is not the strongest quarter, although last year we had a very high revenue level with EUR 16.1 million already compared to the year before. A nice jump as well, but so everything goes in the right direction.
Once again, don't forget, we are in a positive market, but if the market is 10% or 15%, we are outperforming the market 3x . Even if the market would be, which is not 20%, we are going twice as fast as the market. So we are increasing as well the gap to competition in the speed of growing, and there is a lot of market to grab for us. On the EBIT side, as I said a couple of times, in Q3, the EBIT was a little bit stressed by some sell-out activities, one-time activities. So we have 20% EBIT margin in Q3. That reduces the EBIT in the full year to the 23%. Sorry, that's 7 to the 6%. We made a couple of stock clearance activities.
That comes a little bit from the chart that Dimitar showed before, moving from the different generations in a very high speed. That has an effect on working capital on the one hand side and on some things that we decided to clear out to clean the stock before we go into Black Friday. We have some of the things we can use perfectly for Black Friday activities. So we will sell out some of the Generation 2 products that are high sellers, make the market free then for the Generation 3 products. But we are not expecting such an effect on the EBIT margin in Q4 so that we are sure that we will catch up to the 25% that we promised in the midterm as an EBIT margin. We are well prepared for Q4, for Black Friday and Christmas with enough stock and a clean stock.
We don't have any burdens anymore there. We had some old devices with some older chips that we had to sell out. So everything fine. And the feedback that I got yesterday and in the last days from the sales team is as well that the distributors say that the sell-out is working quite well. Everything is good prepared for Black Friday and Christmas. You never know how good Black Friday finally will be, but we are looking forward to Q4. It should be, as expected, quite strong. So we are confirming once again our numbers for the year and see no problem on the EBIT or on the revenue side. The regional growth, the DACH region is still the strongest region with 51.4% total revenue share, growing 47.4% on a very high level already. And we showed a little bit more details on the Capital Market Day.
By the way, the video is online. The presentation is online. You can download it in case you have not been there or you want to check something in more details. How did we develop after we put the DACH organization in Munich in place? We see an acceleration of growth. That's as well the reason why we will do similar things in other countries. Italy is our second strongest country. It's not reported separately, but I can say that Italy is the second fastest growing country or region after the country after the DACH region. We have as well some positive developments, very positive developments in Bavaria and in Spain and in Portugal. In the U.K., we are at the very beginning, but with all the meetings we had, we look forward to a very strong 2025 and 2026.
The U.K. market is size-wise bigger than DACH, so bigger than Germany, Austria, and Switzerland together, or on a similar level at least, which means if you see the revenue numbers you have here, that is something that we are targeting in the U.K. This will not come from one year to another, but in the next three years, we should be on a level as we have it today in the DACH region. So that is one of the focus countries where we are open to invest in people, in marketing activities, visibilities, and we have found good partners already. The rest of the world is growing still on a small level, but it's growing nice.
We have some surprisingly positive, again, on a very small level, feedbacks from Asia, some demand coming from regions where we are not present, but Japan, Korea is asking why we are not pushing Shelly more. We cannot do everything at the same time. We are not magicians that can be everywhere at more than one place at the same time. So we are careful with doing too much, not growing everywhere. And of course, for these countries, we need additional certifications which are possible to get so we don't have to make big product changes, but it all needs effort.
It all needs work on the R&D team and in other teams. But we have more than one leg we can stand on, and that is as well quite positive news. On the premium app side, we have reached EUR 300,000 revenue in the nine-month period with the premium app. We are targeting EUR 700,000 this year. This can be a bit too much, so it might be that we are a bit below because we always have three months delay. The first three months are free for the customer. But on the user side, which shows the future revenue, we already reached EUR 18,000 in the nine months 2024.
Our target was EUR 20,000 by the end of 2024, and I think that we will reach the EUR 20,000 before. So maybe even this month, we are quite close to reaching it. So that is something that is quite positive and will have an effect that is then visible in the first quarter of 2025. So the other numbers target stays as it is, even though there is a small risk that we will not reach the EUR 700,000 revenue in this year, but we will not fail it in a big proportion.
Cash flow. That's a very interesting chart for us because we are more or less loan-free. We have sold our office building. We have paid back the loan that we had to pay for that. We still have an equity ratio of 88.7%, and we have € 11.4 million cash on the bank account end of September. That gives us enough air to breathe to buy the products that we need for the Christmas season. Most of them are there already. And as well to have enough stock end of the year because you know that Chinese New Year is a period where factories are closed. So for the first quarter, we have to be prepared as well, and that gives us enough financial firepower to do so. The big thing, that's what I said at the very beginning, most of our cash is going into the working capital.
The inventory increased by EUR 12.7 million. We have a total inventory now of EUR 22 million. And that's something that we will work on next year. This year, this is additionally stressed by the different product generations that we have to prepare. We have to buy the chips for Gen 4. We had to buy them six months ago already. We have still chips for Gen 2 and Gen 3 that we will sell out by now. So all this stresses the inventory a little bit, but we are able to manage that. On top of this, beginning of the year, we increased our shares in Shelly Tech. That's Qubino, former Qubino company in Czech Republic, and Shelly Asia.
That was an investment of EUR 1.1 million roundabout. We have R&D investments in these nine months of EUR 1.9 million. We sold assets at a value of roundabout EUR 3 million big proportion is coming from our office building. We paid the loan. We have paid a dividend of EUR 2.3 million middle of the year, and as I already said, we have an equity ratio of 88.7%. I think that is something that only a few companies can report about themselves. Last time, I showed you this chart because working capital and, of course, margin level is something that we are working on. We want to keep the high margin level, and this is something that I prepared last time, telling you what are we doing in 2025.
We started the activities already, and here is just with these small bubbles an update where we are. I already said at the beginning that SAP implementation is almost done, so we will be through by the end of the year. We see that we have better reports that it makes our life easier in a lot of areas or will make it easier in a lot of areas. We'll save some costs as well, although you know that SAP is never stopping, so we will constantly improve that. Next year, we will work on the reduction of stock. We have four- to five months of stock now. We want to go down to three to four. We have implemented the first things. One thing is the dedicated procurement department. We have the first people on board.
We have decided to have a chief procurement officer. We have found the person for that. That's not yet public, but we will share as soon as we can. And that will definitely improve the quality of planning as well as the quality of negotiating with Chinese and U.S. suppliers. So, to reduce the cost of goods, to improve the gross margin or keep the gross margin stable. We are already much more restrictive with customer payment terms. That is something that we started in the last quarter, and we see the results. So we are on the same level with customer receivables, although we have more customers asking for longer payment terms. That's quite nice. We have checked as well options for factoring if we need more cash.
We are not using this right now, but we are ready if we need to or almost ready. We will use in the next year whenever we can air freight, sorry, sea freight, instead of air freight. That gives a huge improvement in cost and in the gross margin. Price negotiations have started with some first effects, but it's not on the level as we expect for next year and the year after, and stock control, so avoiding older products in stock, avoiding situations where we have to sell out some things is as well something that is important. We started to put the things in place. Not yet well executed. It's at the very beginning, but we will see the effects in 2025. If you look to the P&L, here you see the reason for the stress on the reduced EBIT.
It comes from sell-out activities from distributors and our activities that are booked as marketing expenses because they are invoicing us their marketing efforts, and that's why it's booked in the blind. We will, of course, rediscuss this if this is right here or should be somewhere else, but this will not change the total picture. That is where the one point something percent lower EBIT comes from, as I said, one-time effects, and, of course, as well, visibility effect. That's the positive side. Dimitar is on a trade show in Munich. We have been on six trade shows, smaller ones in this quarter only.
We had three big ones this year with CES, Light + Building, and IFA, and these three together is an investment in our visibility of more than EUR 1 million, and the rest of the G&A, we have perfectly under control. We are growing underproportionally, although we are hiring a lot of people, especially in R&D, and we will continue hiring people because we have a lot of product ideas that need resources, and in the other departments, we are more or less okay with the level, so EBIT margin 23.6%, net income on a proportionally higher level of 21.2%.
That comes mainly from the effect of selling our old office building. We are now moving, or we moved into the new building that is rented. That gives us more flexibility. And the sales of the office building is not in the EBIT. It's below the EBIT line, goes into the net income. And that's why you see that this is almost on the level as the year before. Some words about where are we on the way to achieve our EUR 105 million target. We reached 61.3% by the end of September this year. Last year, we were at 58.9%. So proportionally, we are closer to reaching the 105 than last year. I told you that feedbacks from the market are positive. Feedback from the sales team are positive. So we are very confident that we will reach that target.
Maybe it can be a little bit more, but I want to be very careful with overpromising. So we are on a good way to reaching this target compared to the other years. Everything is perfectly as planned. So the summary, we are a bit above targets, our internal targets after nine months. The EBIT in Q4 is lower than the average due to some one-time effects in marketing and some sell-out activities. We will stabilize the EBIT on the promised level of 25% in Q4 or in the total year with the Q4. All regions are growing above the market. That is a very important thing for us that we continue outperforming the market 2x , 3x, or even above that. Our regional expansion continues. That's one strong source for revenue. We are progressing very strong in going from do-it-yourself to the professional market.
We now have a roundabout share of 30% in the professional market. In regions like the Nordics, we are about 40% already, and that is the bigger market that we are addressing. We want to do that without losing a millimeter of space in the do-it-yourself market. That is very important for us as well, and we have signed some important contracts, as I said, with companies in the Nordics about listing us for the installers, and we are close to signing contracts in other big regions with these players as well, so that will continue. We have a wider product range. Dimitar talked about that. That will continue, and we will have a stronger product selection for 2025 and 2026. That will increase the gap to competition. Our cloud service and premium app starts to deliver as promised.
We confirmed the guidance for 2024, EUR 105 million revenue and EUR 26 million EBIT. 2026 goals stay as well unchanged, plus EUR 200 million and plus EUR 50 million EBIT. That's something we confirmed as well on the Capital Market Day last week. And beyond that, we are not talking about concrete numbers. That would not be serious. But if you are interested and you could not join last week's meeting, then please check the presentation. You will see what are our ideas beyond 2026 and how do we expect the market and our company to develop. Measures to optimize working capital are on the way. That has started. We have started some projects. We have started to form a new department that will work on that and will deliver in 2025 the needed results.
And that's it. Thank you very much. Open for questions. As usual, you can download the presentation scanning this QR code. You can subscribe to our newsletter if you not have done it already, scanning the other QR code. And now I give back to Franziska and open the stage for questions.
Yeah, thank you so much, Wolfgang, also Dimitar for the insightful presentation. And congrats to the numbers. We're now moving forward to the Q&A session. And as always, we like to keep the conversation engaging, so please use the raise your hand button to ask your question. You can also use our chat, or if you dialed in by your phone, you can do so with the key combination star nine followed by star six. And we have the first question from Bastian. You should be able to speak now. Thank you so much for your question.
Thank you. So two questions for Wolfgang. The first one is on the gross margin. I noticed the Q3 gross margin was exceptionally high with over 60%. Was it also because of the sell-out of old products, or what was the reason for this high gross margin? And the second one, could you split maybe only indicatively the marketing expenses into trade shows, paid marketing, and the partner promotions you told us about? Thank you.
First question, and that's an effect that I mentioned when I showed the P&L chart. We could discuss the allocation of relatively high marketing, third-party marketing expenses that comes from our distributors. Should they go against the gross margin or in the marketing spendings? That's something. We are not touching the invoice prices. That's why the gross margin is quite high. And if they invoice us for some email marketing, some trade shows that they are organizing, that goes into the other line. That's something that we need to rediscuss internally. And as well with the auditors, has no effect on the EBIT, zero. The gross margin, I think, is a little bit too high because we were planning with a gross margin a bit above 50% and not 60%.
That has an effect with one big customer that I cannot go in detail, unfortunately, because that would wake up a couple of questions on their side. But this is something that we have to look at. On the split, I don't have to split in concrete numbers, but a very small proportion is paid online marketing. So we are not spending a lot of money on Google or Facebook paid advertising. That's a very small amount of money. Trade shows are, of course, much more than last year, especially because we have one big trade show more and a lot of small trade shows more. I can only guess that this is maybe EUR 1 million more, 1.5, something in this direction. I can check the numbers and can deliver them afterwards. The big proportion comes from sell-out activities.
That started already the whole year when we are giving money to our distributors so that they can stimulate the markets. They can go to their retailers. They can buy places in the stores or visibility in a web store. That goes to Amazon for visibility on the Amazon web shop. They have an automatic system, and we have as well a manual system, and then on top of this, we have the sell-out activities, and all this is, I would say, it's a little bit too much, and if I want to see something positive in that, we have clear visibility about the numbers now. That is coming from SAP and from our controlling department, so we can immediately steer against that.
And that is something that, with all negative points that I can find there, because I'm not happy about losing 1.5%-2% EBIT, even though it's on a very high level. The positive thing is that we have seen that. We changed already the methodology. We will have countermeasures, and it will not be a miracle to come back to the 25%. That's all fine. So there is never something only bad. There is something positive in that as well. And that's what I want to take from there.
Okay. Thank you.
Yeah, thank you so much for the question. And we have another question from Viran Kirilov. You should be able to speak now. Mr. Kirilov, could you please speak? Okay. Then we have another question from Alexandre Destrait. You should be able to speak now.
Yes, thank you. I have a question regarding the clearance sales. Do you expect it to occur every four years or something going forward, or it's just like one time effect?
No, one-time effect.
One and then two, and then it's okay.
Very clear one-time effect.
Okay. Thank you.
Thank you so much for the question. So we're going to try it again, Mr. Kirilov. You should be able to speak now. You're still muted.
Hello.
Hello. Welcome.
Can you hear me?
Yes.
Hi. I have a question to both of you, to Mr. Mitko and Mr. Wolfgang. I listened to the 5th of November presentation. It was amazing. And since then, I'm thinking because the world is changing, you mentioned you want to go in the U.K. You mentioned Scandinavia is a big target also. Trump came now, and the world is changing. Is it not a good time to get a co-CEO from America, which helps Mr. Wolfgang, because of terms that we also will try to conquer the U.S. on selling chips? And the Americans, they're aggressive types, and there will be problems probably with the economy in Europe. The question is to Mr. Wolfgang and to Mr. Mitko, both of you. Thank you.
Yeah. I have a question first. I didn't think that we need many other co-CEOs or something. If you find the proper person in the United States, which could help us for faster market reach and a partnership, maybe we can do that. But it's not only because now the United States is a different market. It's a much more expensive market than this. And just imagine now there's some doubts, questions regarding the EBIT, everything. Just imagine if you want to spend some kind of marketing activity, money for marketing activity in the United States. This could be, then we can show maybe the negative numbers if you want to be much more faster than others. From another side, something which you say, yes, the Trump maybe will change a little bit the world or significantly, nobody knows. But I think this is in our favor.
First, something which is behind the scenes, which we don't share because it's not part of the Q3. But we're working to move the production of the devices for the United States from China to Bulgaria. The reason for that is that we're expecting there will be some import taxes which will be increasing significantly. And if we move this one, we believe that will keep our products to be competitive, not only to be much more competitive than the original, meaning the made in China, the Chinese product, which will give us the additional advantage, which this is good for us. Currently, we are investigating possible partnerships with a few factories in Bulgaria, one of which can do this job for us. We're also looking for the solution. Can we partially produce the devices by ourselves?
But in our short-term plan, let's say Q1 next year, we partially or fully move the production from the United States here in Europe, especially for Bulgaria. If we found another location, that will be also good for us. When I talk about the economy in Europe, I still think that it's in our favor because the old, let's say, the old approach to the markets gives us high end-user prices, a huge discount for the electricians, a huge discount for the wholesaler, which then the end-users pay them. It will not work anymore. And not only there will be significant we've seen that more and more professionals are looking for alternatives. And what they can find now, they can find there is a European product. There's a Shelly, which offers them the high quality, high availability, the full GDPR compliance, the full European Cyber Act compliance, and everything.
And this is in the much more achievable price. Of course, maybe they will not have a, let's say, the distributors will not have 50% discount to put half price in their pocket. They need to live with just 25% or 30%. But the end benefit of this, the beneficiary of this is end customer. And for what we've seen, our approach is better than the approach which until now is, let's say, the usual one for such kind of the smart home or smart building, smart city devices. And for us, let's say, both of what you say for us is in our favor. I think this could help us to take a bigger market share from the competitors. Regarding the co-CEO, I really don't want to discuss at all. If Wolfgang wants to, but I don't want to discuss this.
Yeah. I would love to have five more. That makes our life easier. We can retire, Dimitar. No, seriously.
If they're so successful, okay.
Seriously, what we are doing is we are strengthening the management level below us. And we did with Germany that I gave up my German position to concentrate fully on the job in the Shelly Group. We found a very good successor. We are looking for a similar strong person for other regions, for the U.K., for other regions in Europe. And I completely agree with what Dimitar just said. I think that the weakness in European economy or German economy helps us because we have the right price points, and we get more and more feedback from installers that they understand that with our devices, they can install more devices, make more money on the installation. And just a nice side information that I received this morning, I read this in a French newspaper.
There is a lawsuit against Schneider Electric, Legrand, and the big two distributors in Europe, Rexel and Sonepar, because they made illegal price agreements to keep the prices and the margins for everyone very high, and the fine is EUR 470 million. This will be a small earthquake for those guys, although Schneider is a very big company and the others as well. This is all in our favor because this will open some doors that maybe Schneider and Legrand tried to keep closed. Although we are such a small company, we know that they had some discussions with Rexel and Sonepar not to list us. Now I think they have a very clear warning to stop that behavior. One last word about the United States. Dimitar said one thing that we are doing, we are not depending or dependent on the United States.
Worst case, worst case scenario, we withdraw from the United States. Trump is making some crazy things. We are not able to maintain that. We close completely the United States, which we are not planning. That's just to make very clear what we are thinking about that. We will not change our 2026 targets. It will still stay on EUR 200 million. We are not depending on the United States. We see some very good developments in Asia. That's what I said. This can be more important for us than the U.S. in the future. And one more thing, we cannot be everywhere. We cannot do everything at the same time. This would not be good.
With all the opportunities and options we see and we presented in Frankfurt last week, we need to focus as well on specific product categories, on specific countries, one thing after the other, one thing at a time. Then we will continue growing in the speed that we expect. We are not promising that we do everything at the same time, Australia, Asia, United States, South America, all countries in Europe. We are not magicians. I don't have the magic wand of Harry Potter to do everything at the same time. We need good people, and we are hiring good people.
Yeah. Thank you so much for the answer. We have another question from the chat. When launching new generations of products, do you see an initial lower gross margin that improves through the product's lifespan?
Initially, we don't see lower gross margin. We see higher gross margins with new products, and usually having different product lineups, so we will start with Gen 4 in 2025. We will keep the Gen 3 for the minimum for the full year 2025, and that gives us the possibility to have a stable product line with very high margins and a fighter line that we can use for Prime Days on Amazon, for Black Friday, and for other activities. It just needs to be steered in a better way. That's where we need better planning, better procurement, better everything, and we're planning for that, and so that gives us more opportunity than risks. Nevertheless, what always can happen, and we are not fail-free, is that you find out that you have a bit too much from one product.
As well, this might have a negative effect short-term on the margin. But in the long term, this might have as well a very positive effect because we are as well thinking about having some products, two or three products for everyone as fighter models. And fighter models means that's the first product that you have in your Shelly household, and then the Shelly flywheel kicks in. And the Shelly flywheel means we know that the average customer adds two devices per year. That means if we just take our 1.5 million, easier to calculate, cloud users, that means in the next 12 months, we will sell three million devices to those customers. We know that. And if the first product would be a very cheap one with a low margin, the next product will be products at the normal margin. So I don't see a risk there.
That's just because we have a one-time effect on selling out some things, and as well there, we might have been a little bit too aggressive because we sold the products out in no time. Yeah, maybe we were a little bit too aggressive. On the other hand, as I said, the payback will come with the products we buy. The customers will buy the second, third, fourth, fifth product, and that is more than enough for payback.
Thank you so much for answering. This is a reminder for you. If you would like to ask a question, please do that via the chat, the audio live, or the key combination when you dialed in via phone, star nine, followed by star six. We have another question. Congratulations, first of all, for the excellent result. I have three questions. First, you seem quite confident in your U.K. market outlook, namely reaching par with the DACH in three years. Could you elaborate what are the key factors behind the level of confidence?
Second question, how long is the trial period for premium subscriptions? The numbers indicated on your presentation indicate a EUR 40 per subscriber annually on a monthly basis. This appears quite low, probably diluted by trials. What will be the figure adjusted for that? The last question, or the last question is, third, at what stage is the transformation into SE company, which was voted on the last GSM?
Okay. I'm not so young anymore, so I have to try to remember three questions.
I'm going to help you, Wolfgang.
So last one, SE transformation. We have the goal from the shareholder assembly. We had an extraordinary shareholder assembly for that. The votes are there. We are now registering. And registering, if you think that Germany is a bureaucratic country, Bulgaria outcompetes that, outperforms that. So we have registered. It will take some time. It's just a formal act, and then we will be the SE. Second thing is the trial period is three months. And the monthly payment for a user is EUR 3.99. The yearly payment is EUR 35. Dimitar, numbers are right. Did I make a mistake? 35 and 3.99.
Not right.
So the assumption is that the average customer pays like € 40 a year. And now we could say, "Oh, that seems to be very low." We could go to € 10 per month. And then definitely, people would not buy anymore. So there are not a lot of, if no, maybe, successful smart home company with a paid version of the application. One big competitor in Germany is Tado. They are making losses with their hardware, promising that one day they will make a lot of money with a paid version of their app. It is not working. So we have to be very careful. We do not want to be too hungry and increase the prices too much.
Maybe it would be even better to reduce the price and to get more premium customers. That is more our thinking. The last question, why am I confident about the U.K.? We started. We have a person in the U.K., a salesman. We have a very good, we had very good talks with a couple of distributors. We think that now we have found two very good distributors. One of them is NetXL. We had a meeting with the CEO and the sales representative this week here in Sofia with very, very positive feedback from their side. So seeing it still on a low level, the development of revenue that they are doing with Shelly devices, the feedback they get from professional customers is super positive.
We are close to sign with big distributors, I mean, do-it-yourself distributors. I don't want to say the names because I'm not allowed to. But that would be like a kickstart in the U.K. market and would give us visibility like crazy. We are already on Amazon. We are on some other platforms. It develops very nice, and I do not expect miracles. I do not expect huge million numbers in 2025, but 2026 should be very nice and visible. 2027, I expect a big kick in the market.
Yeah. Thank you so much for the questions. Thank you so much for answering. We received another question from Pete Van. If EBIT margin for Q2 was at 25.8%, prior to Q3, were you expecting such decline in the operating margin due to the sellout activity?
What was the question about Q3?
So, were you expecting such a decline in operating margin due to the sellout activity?
Yeah. We expected a decline in the EBIT margin, not on that level. I expected it to be 1% less. Unfortunately, we are not able to have 25.0% every quarter. And someone who can do that, I will hire him tomorrow. You always have some ups and downs. And we are in a corridor. We promised 25%, by the way, for 2026. So this was our outlook. We reached the 25% earlier. Last week on our Capital Market Day, I said as well that we and Dimitar and I are 100% aligned on that. We are willing to sacrifice EBIT percentages for more revenue. So if we would get the same euro amount for more revenue, we would be more than happy because that's a market gain business. And it's a euro business and not a percentage business. So what does this mean?
In 2026, if we make EUR 50 million, not out of EUR 200 million revenue, but out of EUR 250 million revenue, I would be more than happy because that means we reach more customers. We have more opportunities for the future. It's not about percentage EBIT. It's about the total EBIT. We are in a very healthy situation. Once again, if someone is able to steer the company exactly on the point, I would start to be a bit suspicious to say, "What if everything's fine? How are they doing this?" It is impossible. You always have 1%-2% ups and downs on this level of EBIT margin. I'm not talking about retail business where you have 2% total EBIT. We have 25% total EBIT. Now we have 23-point-something, which is, for me, perfect. The outlook for the future is increasing that a little bit.
We were a bit too aggressive on sellouts. Afterwards, you always know better than before. And I think the positive thing is that sometimes you need to be if everything goes perfect, revenue grows, EBIT grows, everything's fine, you might be a bit lazy. And this is a wake-up call exactly at the right time so that everyone in the company is that, "Oops, let's pay attention to get this 1% back," and we will.
Yeah. Thank you so much, Wolfgang. We have a follow-up question. Regarding supply chain and the USA, what would be the advantage of choosing Bulgaria over countries like Mexico, for example?
Yeah. If you pay attention, Trump said that he will increase the import duties from Mexico by 100% or something like that because he doesn't like Mexico. And so this is not an option. It might be one if he's not increasing the import duties. He might increase the import duties from Europe as well, not on the level as he wants to do this from China. But Bulgaria has one advantage. We know that the labor costs here are low. We know that we could produce on a similar level as in China.
The shipment costs for spare parts, materials from China to Bulgaria would be more expensive than shipping the final product. So we would have some disadvantages. And on the other hand, we might have some support from the European Union to open a factory here that would help on the investment side. Dimitar, do you want to add something?
Yeah. Something also, devices produced will have an EUR.1 certificate, which also will help us for some countries where they're looking for the products, which is made in Europe. This will help us also to increase the sales in these countries, which is also important. And also, don't forget that this somehow is a training if you want to move also partially production for devices for Europe because devices are quite similar. When you produce them for the United States, for us, it's very easy. We can produce some numbers also for Europe for European customers. And basically, I think it's a good time to do that. Mexico, one more factory somewhere to control, to managing will not be easy and really hard for the USA. I think Mexico is still under the radar of the new American. Yeah. Okay.
Thank you so much, also, Dimitar. And we're coming now to an end of today's earnings call. I thank you so much for your attention. Should any further questions arise in the future, please do not hesitate to contact us or the investor relations management team. And of course, I hand over now for some final remarks to the leadership team. Thank you so much and have a good day.
Yeah. So thanks again for joining. And especially thanks again for joining after so many people joined last week's Capital Market Day that showed the interest in Shelly. And we are really proud to have you on board as analysts or as investors already or maybe future investors. And we can promise that we will do the maximum to reach our targets and to keep our promises. Thank you very much and have a good rest of the week.
Thank you very much from my side, too.
Goodbye.